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Citi maintains Neutral on General Mills stock after FY25 guidance cut and valuation concerns.

EditorAhmed Abdulazez Abdulkadir
Published 12/19/2024, 05:38 AM
GIS
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On Thursday, Citi analyst Thomas Palmer revised the price target on shares of General Mills (NYSE:GIS) to $67 from the previous $71, while maintaining a Neutral rating on the stock. General Mills' shares, currently trading near their 52-week low with a market capitalization of $35.29 billion, experienced a 3% decline today following the announcement of a lowered forecast for fiscal year 2025.

The analyst acknowledged that General Mills is currently trading at the lower end of its historical valuation ranges based on price-to-earnings (P/E) and enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) metrics. With a P/E ratio of 14.34x and an attractive dividend yield of 3.76%, InvestingPro analysis suggests the stock is currently undervalued. Despite the negative impact of shipment timing effects, underlying organic sales growth appears to be improving gradually.

Additionally, Palmer noted General Mills' proactive approach in adjusting its guidance compared to peers such as Conagra Brands (NYSE:NYSE:CAG) and Campbell Soup Company (NYSE:NYSE:CPB), which have had slower starts to the year. However, the analyst expressed difficulty in adopting a more positive outlook for General Mills' stock, citing concerns over the slow pace of organic sales growth (OSG) recovery and potential earnings challenges ahead. InvestingPro subscribers can access 8 additional key insights and a comprehensive analysis of General Mills' financial health, which currently rates as "GOOD" according to proprietary metrics.

For fiscal year 2026, the analyst pointed out that increased promotional activities could impact the first half of the year, and pending mergers and acquisitions could dilute earnings per share (EPS) by approximately 4%. These factors contribute to the cautious stance on the future performance of General Mills' shares, despite its impressive 54-year track record of maintaining dividend payments and current annual revenue of $19.8 billion.

In other recent news, General Mills has been under the spotlight due to developments in its financial outlook. Despite reporting better-than-expected second quarter earnings with an adjusted earnings per share of $1.40 and a 2% year-over-year revenue increase to $5.2 billion, the company adjusted its full-year outlook. General Mills now projects a 2-4% decline in its adjusted operating profit, attributing this to increased promotional investments and other anticipated challenges.

Jefferies has adjusted its target for General Mills to $66 due to price concerns, while maintaining a Hold rating, advising investors to keep their current position on General Mills shares. On the other hand, Stifel reaffirmed its Buy rating on General Mills with a steady price target of $82.00, citing strong operating profit growth.

In the food and beverage sector, Kraft Heinz (NASDAQ:KHC)'s stock experienced a downturn after General Mills lowered its annual profit forecast. Investors are closely watching Kraft Heinz for any indications of similar challenges. These are recent developments that have been shaping the narrative around General Mills, providing investors with critical insights into the company's financial performance and industry trends.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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