On Wednesday, Citi analyst Thomas Palmer adjusted the price target for General Mills (NYSE:GIS), a major player in the food industry, to $75.00 from the previous target of $76.00. The firm has decided to maintain a Neutral rating on the company's shares.
This decision came after General Mills reported its first-quarter sales and earnings per share for fiscal year 2025, which were slightly above the consensus estimates provided by Visible Alpha.
General Mills' shares experienced a slight decline of 0.4% at the time of the announcement, underperforming the S5PACK index by approximately 50 basis points. According to the analyst, General Mills has shown some initial progress, which is seen as encouraging. However, the company still has significant work ahead in order to meet its operational sales growth (OSG) target of 0-1% for fiscal year 2025, and further still to reach its long-term goal of 2-3% OSG. The first-quarter OSG was reported at -1%.
The analyst noted that General Mills' stock is currently trading at historical averages when looking at price-to-earnings (P/E) and enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratios.
Nevertheless, the analyst pointed out that potential risks could arise from a dilutive divestiture that may impact forward earnings estimates, which could in turn limit the stock's upside potential.
Despite these potential risks, there is also a possibility that General Mills' shares may benefit from a shift in the market, with investors potentially rotating back towards food stocks. This dynamic illustrates the balance of factors that could influence the company's stock performance in the near term.
In other recent news, General Mills reported a modest decrease in quarterly sales, surpassing analyst expectations with figures amounting to $4.85 billion, a 1% decline from the same period last year. The company's strategic pricing for premium products, such as snacks and pet foods, has mitigated the effects of a consumer demand slowdown.
Citi updated its outlook on General Mills shares, increasing the price target to $76 while maintaining a Neutral rating, expecting the company to report operating sales growth and earnings per share that exceed consensus estimates.
General Mills has also been involved in divestiture activities. The company sold its North American Yogurt business for $2.1 billion to French dairy companies Lactalis and Sodiaal. This transaction is projected to be 3 percent dilutive to General Mills' adjusted earnings per share in the first 12 months post-closure, excluding one-time impacts and transaction costs. Mizuho reaffirmed its Neutral stance on General Mills shares in light of this divestiture.
Furthermore, General Mills appointed Asheesh Saksena as Chief Strategy & Growth Officer and is considering potential mergers and acquisitions in the $1 billion to $1.5 billion range. These recent developments highlight the company's strategic moves in the face of market challenges.
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