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On Thursday, Bernstein SocGen Group adjusted its financial outlook for General Mills (NYSE:GIS), reducing the company’s price target from $68.00 to $62.00, while keeping a Market Perform rating on the stock. Currently trading at $59.20, the company has seen 12 analysts revise their earnings estimates downward according to InvestingPro data. The decision follows a recent update from General Mills, where the company lowered its guidance this quarter after initially suspending it during the CAGNY conference in mid-February.
Analysts pointed to a top-line miss and additional guidance reductions, attributing the company’s struggles to changing consumer behaviors. The company’s revenue declined by 2.62% over the last twelve months, though it maintains a strong market position with a $32.4 billion market capitalization. Consumers are increasingly seeking value, buying more basic foods around the store, opting for private labels, and avoiding expensive channels like convenience stores. These trends suggest a shift towards cost-conscious shopping amid economic uncertainty.
The analysis also highlighted a potential impact from health and wellness trends, noting a decline in demand for snacking and carb-heavy foods. Despite these challenges, General Mills maintains a robust 4.05% dividend yield and has consistently paid dividends for 55 consecutive years, as reported by InvestingPro. This shift could be partly due to the broader U.S. population’s focus on health and wellness, as well as the specific influence of GLP-1 drug usage, which is estimated to have reached 10% of U.S. adults for diabetes and weight loss treatments. General Mills management believes that these drugs’ current uptake rate is affecting consumer food choices.
Bernstein’s revised price target is based on lowered EBITDA estimates for the next 12 to 24 months, decreasing from $4,455 million to $4,262 million. Additionally, the EBITDA multiple has been adjusted from 11.3x to 11.1x, reflecting concerns over the macroeconomic environment and slowing trends in General Mills’ various segments.
The updated guidance and price target reflect the challenges General Mills faces in a market where consumer habits are rapidly evolving, influenced by economic pressures and a growing focus on health and wellness. According to InvestingPro’s Fair Value analysis, the stock is currently fairly valued. Despite these challenges, Bernstein maintains a Market Perform rating, indicating a neutral outlook on the stock’s performance. For deeper insights into General Mills’ financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, along with 8 additional ProTips and extensive financial metrics.
In other recent news, General Mills reported its third-quarter fiscal 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $1.00, although revenue fell short at $4.8 billion against a forecast of $4.99 billion. The company is facing several challenges, including weaker sales in the snacks category and inventory reductions at retailers, impacting earnings before interest and taxes (EBIT). Mizuho (NYSE:MFG) Securities and Barclays (LON:BARC) have both lowered their price targets for General Mills to $60, citing concerns over sales and strategic reinvestments. Mizuho maintains a Neutral rating, while Barclays holds an Equalweight rating, highlighting the company’s increased spending in trade and media to boost consumer value.
Stifel, however, remains optimistic, maintaining a Buy rating with a $65 price target, noting that General Mills surpassed EPS expectations despite softer sales. The company is focusing on strategic reinvestments and innovation, aiming to improve its market position through heightened promotional activities. Analysts from Mizuho and Barclays have revised their earnings estimates downward for fiscal years 2025 and 2026, reflecting the impact of these strategic shifts. General Mills is also targeting an additional $100 million in cost savings for reinvestment, with a focus on accelerating organic growth and launching targeted innovations in fiscal 2026.
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