General Mills To Gain Strength From Rebound In Pet Segment And Stabilizing Retail Growth, Analyst Upgrades Stock

BofA Securities analyst Peter T. Galbo upgraded General Mills, Inc. GIS to Buy from Neutral, raising the price forecast to $80 from $78.

The analyst suggests that General Mills is expected to return to organic sales growth at a faster and more sustainable rate compared to other center-store food peers.

This growth will be driven by factors such as the re-acceleration in the Pet segment (specifically Blue Buffalo) and stabilization in North America Retail, as issues in the dough category are moving behind the company, Galbo writes.

The analyst also highlights that General Mills offers investors exposure to the recovery in the U.S. Pet market and a surge in value stocks, with its fundamentals appearing more attractive when compared to other food industry peers.

The analyst expresses increasing optimism about the turnaround of Blue Buffalo following a challenging FY24, which saw a -4% organic growth.

Also Read: Sam Altman To Donate $1M To Trump’s Inauguration Fund, Following Zuckerberg, Bezos: ‘Eager To Support’

Galbo highlights that initiatives in the dog food segment are fostering greater confidence, with the Life Protection Formula experiencing high-single-digit percentage growth and the Wilderness line showing signs of stabilization, partly due to more grain-free options and smaller pack sizes. While the pet treats category remains a challenge, the second half of the year offers easier comparisons, which could lead to a more pronounced recovery.

Since FY19, the pet segment has experienced a faster growth rate (averaging +8.7%) compared to the overall General Mills portfolio (averaging +4.7%), contributing to valuation gains; if pet growth continues to lead the overall portfolio, the analyst believes valuation should rise accordingly.

Price Action: GIS shares are trading higher by 1% to $66.74 at last check Friday.

Read Next:

• OpenAI Co-Founders, Now Rivals Sam Altman And Elon Musk Clash Over ChatGPT And xAI's Grok Chatbots Again