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Argus is staying constructive on Kellogg Company (NYSE:K) ahead of the Q3 earnings season in the food sector.

Analyst Chris Graja and team think Kellogg management is well aware of the challenges it faces from changing perceptions about food, changing shopping habits, and a changing retailer environment. He also noted that Kellogg (K) has lowered costs even as it focuses on growth initiatives and creating shareholder value.

Of special interest, Kellogg (K) will be leaner after announcing that it is spinning off its North American cereal business and its plant-based foods business led by MorningStar Farms. Kellogg (K) is expected to complete the transactions by the end of 2023 and deliver an update on the management and organizational structures in Q1 of 2023.

“We like the proposed spinoff plan very much. While many investors appreciate K’s very beta of approximately 0.5, we have always felt that investors did not fully appreciate the value added by MorningStar Farms and wonderful snack brands like Pringles.”

Argus has a Buy rating on Kellogg (K) and price target of $85.

Shares of Kellogg (K) rose 0.29% on Monday to $69.85 on a day that investors are nibbling on food stocks amid broad market weakness.

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