Kellanova Beats Q4 Estimates But Net Income Falls 15.8% as Mars Acquisition Keeps Stock Flat

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Kellanov (NYSE: K) reported Q4 earnings this morning that delivered a narrow beat on both earnings and revenue, yet the stock barely moved. Shares were essentially flat at $82.96 shortly after the 8:04 AM ET release. The real story isn't what the company delivered this quarter. It's what the numbers reveal about underlying pressure, and why the pending Mars acquisition is keeping the stock pinned near its deal price regardless of performance.

A Beat That Masks the Real Problem

Kellanov posted $0.88 in adjusted earnings per share against a $0.87 estimate, and revenue of $3.26 billion versus $3.25 billion expected. On the surface, clean wins. But look deeper and you see a company under stress. Net income fell 15.8% year over year. Gross profit contracted 7.89%. Operating income slipped 1.74% despite the company's efforts to manage costs. The revenue beat of roughly $9 million matters far less than the margin compression underneath.

I'd keep an eye on the cash flow picture though. Operating cash flow surged 42.5% year over year to $788 million, a genuine bright spot. Free cash flow landed at $320 million. That strength suggests the company is converting sales into actual cash despite the profitability headwinds, which matters for dividend sustainability and debt management.

Where the Growth Actually Showed Up

Adjusted operating profit rose 7.3%, a rare positive in a quarter marked by "prolonged category-wide softness and higher costs," as CEO Steve Cahillane described it. The noodles segment in Africa delivered significant growth, a rare bright spot in an otherwise sluggish business. Favorable currency translation also helped. These aren't trivial wins. They show the company found pockets of demand even as core snacking categories faced headwinds.

Revenue grew just 0.84% year over year. That's essentially flat. When you're growing at less than 1% and margins are compressing, you're running hard just to stay in place.

The Numbers Tell a Concerning Story

Key Figures

Adjusted EPS: $0.88 (vs. $0.87 expected); +1.1% beat Revenue: $3.26B (vs. $3.25B expected); up 0.84% year over year Gross Profit: $1.085B; down 7.89% year over year Operating Income: $452M; down 1.74% year over year Net Income: $309M; down 15.80% year over year Operating Cash Flow: $788M; up 42.50% year over year Free Cash Flow: $320M Capital Expenditures: $468M; up 227% year over year

The capex surge is notable. The company is investing heavily, which could signal confidence in future growth or simply reflect timing of planned projects. Either way, it's consuming cash that might otherwise support shareholder returns.

Story Continues

Management Sounds Cautious But Focused

Cahillane emphasized resilience and outlined a pivot toward innovation, productivity, and emerging markets expansion. He highlighted noodles in Africa specifically. The company is also still working toward closing the Mars acquisition, expected by year-end 2025. Management didn't provide forward guidance, citing the pending transaction. That's standard for deals in flight, but it also means investors have no clarity on management's view of 2026 demand or margins.

The tone was measured. Cahillane acknowledged the downturn without making excuses, and pointed to concrete actions. That's the posture you'd expect from a CEO managing through a cyclical slowdown while simultaneously closing a transformational deal.

What Matters Now

The stock is trading at the Mars acquisition price of roughly $83.50, which explains why today's earnings barely moved the needle. The deal provides a valuation floor that insulates the stock from earnings disappointment. What you should watch is whether the company can stabilize margins as the quarter progresses and whether the noodles expansion in Africa becomes a genuine growth driver or remains a one-quarter blip. Until the Mars deal closes, the stock will likely remain range-bound near current levels regardless of quarterly results.

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