kellogg shares climbed 2 on tuesday following the news that the food maker would split into three companies—its cereal business global snacking brands and plantbased protein products today the shares are 1 lower should investors be buying the stock it depends on what they’re craving kellogg ticker k has climbed over 5 year to date a period that’s seen the sp 500 tumble 21 that’s largely due to the fact that the market is favoring defensive names like consumer staples which typically enjoy more stable earnings flows after all no matter how bad the economy gets you still need to eat breakfast on the flip side that breakfast doesn’t have to be brand name cereal—and skeptics argue that after pandemicfueled growth consumers will choose to make just that tradeoff as inflation squeezes budgets looking purely at price and payout for bargain hunters the shares present a fairly attractive proposition in the packaged food industry which has held up relatively well compared with the broader market in 2022 kellogg trades at 164 times forward earnings not far above its 155 average for the past five years that may not look particularly cheap at first blush but peers like cocacola ko pepsico pep mondelez international mdlz and colgatepalmolive cl all trade at 20 or more times fellow cereal maker general mills gis changes hands for more than 17 times and post holdings post which also sells private label offerings that often increase in popularity during economic downturns has been bid up to more than 28 times it’s worth noting that kellogg’s generous 34 dividend is comfortably higher than all those stocks’ yields as well investors wouldn’t necessarily compromise on growth much either while consensus estimates may move around to factor in the spinoffs at present analysts expect kellogg earnings to climb by nearly a third this year and more than 50 in 2023 the company’s most recent earnings reported in may were ahead of expectations that quarter may have been a bit of an outlier though given that kellogg hasn’t been terribly consistent in beating consensus earnings expectations in recent years nonetheless it did provide steady earnings per share growth during the 200709 recession kellogg grew earnings to 276 a share in 2007 up from 251 in 2006 and in 2008—one of the most painful years for the us economy in recent decades—eps climbed again to 299 that figured reached 316 in 2009 of course kellogg’s portfolio has changed in the intervening years and once the company splits 2008 will offer even less of an applestoapples comparison still the spinoffs won’t be complete until the end of 2023 so given that bears fear the economy may tip into a recession near term or has already done so past performance does provide some comfort in fact barron’s has argued that brand name foods are better positioned postpandemic than they have been in some time yet what of the spinoffs themselves that presents more of a mixed bag for investors indeed those focused on stability may want to steer clear the spinoff creates execution risk at a time when brand name consumer companies are already facing increasing risks the pandemic provided tailwinds in that more people were eating at home had stimulus funds to spend at the grocery store and tight supplies meant that sales were few and far between now people are venturing out again—restaurant spending has been up double digits year over year in recent months inflation has crimped grocery budgets and while companies may want to raise prices to cover the increased cost of raw materials retailers may pressure them to do just the opposite to retain customers management needs to stay laser focused to remain on top of this fast moving environment then there’s the fact that the attempt to unlock higher multiples for kellogg’s faster growing businesses could backfire—a concern even among bulls morningstar analyst erin lash still thinks the shares are attractive but factors from reduced scale to dissynergies would lower her fair value estimate for the company to 83 from 88 as she doesn’t think the move will “enhance kellogg’s competitive position or financial prospects” likewise other analysts question that a sumoftheparts analysis yields much in the way of enhanced value credit suisse analyst robert moskow writes that “if global snack co were to fetch a higher valuation multiple akin to global snack leader mondelez 16 times earnings before interest taxes depreciation and amortization the valuation would increase to 80 a share but with only 60 of global snack co’s sales actually coming from snacks and 40 coming from slowergrowth breakfast cereal noodles etc we think a 14 times ebitda multiple is more appropriate” that said those with a longerterm view may find more reasons to bet on increased value than not ubs analyst cody ross writes that the move is likely a welcome one for shareholders as he believes it should “enable kellogg to earn a higher multiple for its faster growth snacking business and plantbased businesses while allowing more strategic investments in them over the longterm” likewise if the company can prove that its growth wasn’t just pandemicdependent over the next year or so that would add more fuel to the argument that its fastestgrowing components are worth more evercore isi analyst david palmer argues that kellogg is “worth more apart” while he thinks the future global snack co deserves to trade at a slight discount to mondelez for various reasons he thinks it will ultimately likewise notch a midsingle digits organic growth rate in addition kellogg’s “power snacking brands of pringles and cheezit represent about a third of sales having grown 13 and 10 respectively and remain key growth drivers going forward” all that is a lot of food for thought for investors—they’ll have to determine how much spicy risk suits their palate