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Kellogg Shelves Elves
By Rick Aristotle Munarriz (TMF Edible)
March 18, 2005

In what may come as crumbling news to any devout cookie lover, Kellogg (NYSE: K) announced that it is thinking about closing down some of its Keebler bakeries in an effort to help shave costs through consolidation and centralization.

No elves are being displaced. These are real people with real jobs, and Kellogg will be negotiating with the related unions to bargain for the plant closures. Despite the upfront costs involved with the potential bakery closings, the company reaffirmed that it still expects to earn between $2.28 and $2.32 per share this year.

Trading at just over 18 times those profit targets certainly doesn't make Kellogg seem cheap. Despite the company's quality line of products -- which go beyond Keebler and the namesake cereal lines to include Eggo, Cheez-It, Pop Tarts, and Morningstar Farms -- this is a company whose organic earnings growth over time will fall well short of what most investors expect when they pay 19 times free cash flow for a company...
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