Citi Sees Kellogg As A Prime Take-Out Candidate

Citi's David Driscoll issued an interesting note on Kellogg Company (NYSE: K) Thursday morning: "Take-Out Potential & US Cereal Resurgence Present Compelling Risk/Reward Profile at Kellogg; Reiterate as Our Top Pick."

The analyst's comments followed recent management meetings with CEO John Bryant, CFO Ron Dissinger and US Morning Foods Pres Craig Bahner.

The main takeaway highlighted was a "massive" margin opportunity which, according to Driscoll, demonstrated Kellogg as "the most significant cost cutting & margin opportunities within US packaged foods."

Take-Out Candidates

The juiciest comments from Driscoll stemmed from discussion of Kraft Heinz Co. (NASDAQ: KHC)'s potentially sustainable margins.

"Kellogg would adopt similar cost cutting techniques to expand margins over its stated target of 17%-18% by 2020. However, the clock is ticking as KHC is quickly de-leveraging and should be in position for more M&A activity in 2017," Driscoll said.

The Citi analyst pointed at Kellogg, General Mills, Inc. (NYSE: GIS) and Mondelez International Inc (NASDAQ: MDLZ) as "likely take-out targets."