The Kellogg Company (K) announced that its cereal plant workers had ended a two-and-a-half-month-long strike by agreeing to a new five-year contract on Tuesday, according to Wall Street Journal.
Shares closed down 2.7% at $62.65 on December 21.
Terms of the New Contract
The cereal plant union at four cereal manufacturing plants had started the strike on October 5, sighting concerns such as lower minimum wages compared to the inflationary trends, and lack of proper medical benefits. At a time when companies are already facing labor shortages due to the pandemic, companies facing labor strikes are finding it even more difficult to negotiate terms and bring employees back to work.
However, Kellogg finally found common ground with its cereal plant union with a new contract that was floated last week. The new contract includes pay hikes, added health benefits, pension multiplier adjustments, as well as a condition that no plant will be shut for about five years.
According to the contract, legacy employees (experience of four years or more) will get a wage hike of $1.10 per hour. Meanwhile, transitional employees and new joiners will earn $24.11 per hour.
Moreover, the newer employees will also be eligible for a new dental benefit and all employees will receive a new vision benefit offering.
Comments
international president of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, Anthony Shelton, said, “This agreement makes gains and does not include any concessions.”
Kellogg spokeswoman, Kris Bahner, said, “We are pleased that we have reached an agreement that brings our cereal employees back to work.”
Analysts’ Take
Recently, RBC Capital analyst Nik Modi reiterated a Hold rating on the stock with a price target of $66, which implies 5.4% upside potential to current levels. The analyst expects Kellogg to report net income of $0.90 per share in the upcoming earnings for the fourth quarter of fiscal 2021.
Overall, the stock has a Hold consensus rating based on 3 Buys, 6 Holds, and 1 Sell. The average Kellogg price target of $68.10 implies 8.7% upside potential to current levels. Shares have gained 2.4% over the past year.
Risk Analysis
According to the new TipRanks Risk Factors tool, Kellogg stock is at risk mainly from two factors: Macro & Political and Production, which contribute 26% and 23% to the total 31 risks identified for the stock, respectively.
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