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Kellogg's Stuck in a Box

Tickers in this article: CAG CPB GIS K MDLZ NSRGY POST

NEW YORK (TheStreet) -- Shares of cereal and snack food giant Kellogg have been stuck in range since the first of April. While investors are understandably disappointed, that the stock has posted any year-to-date gains at all should qualify as a win given the company's recent quarterly results.

While Kellogg still has dominant positions on the cereal and snack food shelves, the company has struggled to please the Street with organic growth. I won't go so far as to proclaim that General Mills and Post have become better investments. But on a relative basis, it's hard to dispute their respective results. Following yet another disappointing quarter, Kellogg shares may be stale for the foreseeable future.

With third-quarter revenue down 0.1% year-over-year, there's no question that Kellogg is still dealing with weak volumes. This was enough for an "in line" performance, given that these shares are trading at a P/E close to 24, though the Street is still pricing Kellogg stock on the assumption that there will be a second-half rebound in volumes. I'm not as optimistic, given that organic revenue increased by less-than 1%.

If you've been following this sector for a while, there is nothing that analysts love to scrutinize more than "organic growth," which measures a company's operational performance using only internal resources and excluding events like acquisitions.

To be fair, Kellogg is not alone in this situation. As with ConAgra Foods and Campbell Soup Company , which have grown solely through acquisitions, Kellogg's management, which has acquired strong brands like Keebler and Pringles, hasn't been shy about doing deals to boost the top-line. Still, as noted, the stock has barely moved in eight months, and investors have been disappointed with the "soggy" results.

With Kellogg's rich history, management deserves the benefit of the doubt. The thing is, with revenue in North America declining by 1.3% to $2.4 billion, not to mention 2.2% decline in cereals, there are no "quick fixes" to address these underlying struggles. And I believe we've reached a point where we can safely say that, despite management's innovative efforts, the company is beginning to lose share in some key markets.