Shares of Kellogg Company (NYSE:K) stock were down 4% as of 12:45 p.m. Thursday after the world's largest breakfast cereal provider earlier in the day delivered fourth-quarter results that left investors with a bitter aftertaste. The cereal giant reported disappointing earnings for the quarter and lowered key targets for its 2015 guidance.

One of the most important takeaways from any quarterly release is sales growth on a year-over-year basis. Taking a look first at sales, Kellogg missed the mark.

  • Net sales for the fourth quarter actually increased 0.3%, year over year, to $3.5 billion.  
  • Yet fourth-quarter comparable sales slid 2.2%.
  • Full-year net sales dropped 1.4% and full-year comparable sales slid 2%. 

The reason comparable sales matter is because this figure strips out variances due to foreign currency translation, price increases, and other associated costs. Comparable sales figures simply measure how much cereal Kellogg is selling versus the prior year and, as we can see, it's selling less.

Kellogg swings to a loss on Project K
This may sound dire but it's not a shock for Kellogg investors. The company has been struggling to adapt to changing U.S. consumer tastes over the past year, and it has been honest with investors about its challenges. For the fourth quarter Kellogg reported an EPS quarterly loss of $0.82 per share, but even that was not as bad as it seems. The loss was due largely to the impact of mark-to-market adjustments and costs related to Project K, a multiyear cost savings and efficiently plan management launched in late 2013. Comparable fourth-quarter earnings, excluding these adjustments, were $0.84 per share (a 1.2% decline year over year) and full-year comparable earnings slid only 1%.

In a statement regarding Project K and Kellogg's challenges, CEO John Bryant said: "In 2014, we have been addressing the challenges we have faced in some of the company's developed businesses. Project K, our four-year efficiency-and-effectiveness program, is providing flexibility, and we have invested in brand-building initiatives, in-store sales capabilities, and new, improved products.  We expect that 2015 will be a rebuilding year for us and that our investment will provide a strong platform for future growth."

2015 guidance: A flat year
Kellogg also issued "no-growth" guidance for 2015. The company is projecting comparable net sales to be flat in 2015 and comparable currency neutral earnings to land somewhere between flat to minus 2%. 

It also changed its long-term sales growth target for investors. Kellogg's target for sales growth had been between 3% and 4%, and it dropped it to 1% to 3%. While this move likely won't win Kellogg any fans among analysts, it should have been expected given Kellogg's recent stagnant sales. The company trades at a P/E multiple of 12 and has been on the radar of some value investors, but it's not a growth stock.

What Kellogg must do now is find a way to adapt to the changing tastes of U.S. consumers. For a variety of reasons, customers are skipping cold, packaged cereals. So while the overall number of people eating breakfast has risen, according to this report from The NPD Group, annual cereal sales in the U.S. have dropped by $3.9 billion since 2000.

Until Kellogg either grows its non-cereal portfolio, or until the decline in cold cereal slows, it will stagnate. In the fourth quarter there were highlights for Kellogg. For instance Latin America net sales grew 7.2%, but they were dragged down by its  7.7% slide in U.S. morning foods net sales. Kellogg's stock may continue to stall, despite its seemingly cheap price, until it stabilizes its U.S. sales.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.