General Mills Has Limited Upside Amid Consumer Value Seeking and Soft Pet Segment Performance: Analyst

Mizuho Securities analyst John Baumgartner reiterated a Neutral rating on the shares of General Mills Inc GIS and lowered the price target from $70 to $65.

Q2 FY24 adjusted EPS of $1.25 beat the street's $1.16 estimate.

The outlook for H2 was reduced given slower volume recovery, continued softness at Pet, and consumer behavior uncertainty, writes the analyst.

U.S. consumers continue to display stronger-than-anticipated value seeking behaviors in the store while away-from-home spending habits remain resilient for higher-income households, says the analyst.

The analyst is assuming a more tempered outlook for H2, given limited visibility into the potential that improving financial conditions will enable consumers to naturally adjust to higher price levels.

The analyst sees minimal potential for the stock upside versus street numbers this fiscal year.

But, the analyst is encouraged by the responsiveness in addressing the value equation in pet food and, while more work likely remains in people food, GIS remains committed to brand reinvestment.

The analyst has lowered FY24 organic sales growth estimate on extended volume pressure.

Weak revenue & softer H2 revenue expectations amplify bears' concerns for operating deleverage, industry pricing/promo discipline, and the foundation underlying pet food.

Some headwinds may improve by spring, but time is required to improve the value equation in other categories, says the analyst.

Price Action: GIS shares are trading higher by 0.25% at $64.37 on the last check Friday.

Photo via Company