Kellogg Earnings: Despite Resilience Amid Headwinds, Business Separation Takes the Limelight

We don't expect a material change to our $84 sum-of-the-parts valuation for wide-moat Kellogg after digesting solid second-quarter results. Despite sales growth (up 7.1% on an organic basis) and advancing margins (up 130 and 120 basis points, respectively, at the adjusted gross and operating margin lines to 33.7% and 14.9%), the market has yet to be placated, as it awaits further details on the impending split into its global snacking and North American cereal arms. The breakup remains on track to transpire during the fourth quarter, though specifics were deferred to the individual firm's investor days on Aug. 9.