Citi cuts General Mills stock price target to $56 from $57

On Thursday, Citi analyst Thomas Palmer revised the price target for General Mills (NYSE:GIS) stock to $56.00, down from the previous $57.00, while retaining a Neutral rating on the shares. Currently trading at $54.44, the $29.81 billion market cap company is showing signs of being undervalued according to InvestingPro analysis. The adjustment comes as Palmer projects a decline in the company’s operating profit for fiscal year 2026 (FY26), anticipating a nearly $277 million year-over-year decrease, aligning with the fact that 15 analysts have recently revised their earnings estimates downward.

Palmer points to several factors that General Mills has identified as potential pressures on its FY26 operating profit, which could amount to almost $600 million in reductions. These include approximately $60 million from incremental investments initiated in the third quarter of fiscal year 2025 (3Q25), largely for Pillsbury and Totino’s brands. Additionally, around $300 million is expected from increased commercial investments that started in the fourth quarter of fiscal year 2025 (4Q25), about $75 million from higher incentive compensation, and approximately $150 million resulting from the yogurt business divestiture, with the assumption that the U.S. sale will conclude in the second quarter of fiscal year 2026 (2Q26). Despite these challenges, InvestingPro data shows the company maintains strong profitability with $19.64 billion in revenue and a healthy gross profit margin of 35.4%. Get access to the full General Mills Pro Research Report and 1,400+ other comprehensive company analyses on InvestingPro.

The analyst also incorporates a forecast of higher cost of goods sold (COGS) inflation due to tariffs, albeit less than those recently discussed for competitors like Kraft Heinz (NASDAQ:KHC) and Hershey (HSY). Despite the below-consensus earnings per share (EPS) estimate of $3.91 for FY26, compared to the Visible Alpha consensus of $4.01, Palmer’s outlook assumes that COGS productivity improvements will surpass tariff-induced COGS inflation and that General Mills will achieve a year-over-year volume growth of 1.1%.

The revised earnings estimates for General Mills are now set at $4.22 for FY25, down from $4.24, and $3.91 for FY26, reduced from $4.09. For FY27, the estimate has been lowered to $4.25 from $4.36. The new target price reflects a more cautious earnings outlook.

Palmer concludes by noting that the stock price of General Mills has declined by approximately 10% over the past couple of months, now trading near its 52-week low of $53.82. This pullback, along with the downward revision of the FY26 EPS estimate, suggests that the current stock price more accurately reflects the sales and earnings risks for the company. Despite market concerns, the stock maintains an attractive P/E ratio of 11.93x and offers a substantial 4.41% dividend yield, having maintained dividend payments for 55 consecutive years. InvestingPro subscribers can access additional insights and metrics to better evaluate General Mills’ investment potential.

In other recent news, General Mills announced the issuance of €750 million in 3.600% notes due in 2032, as part of its capital management strategy. This financial move aims to raise funds potentially for refinancing existing debt or other corporate purposes. Meanwhile, the U.S. Food and Drug Administration’s decision to phase out synthetic dyes from the food supply will impact General Mills, among other companies. This regulatory change is part of a broader initiative to promote healthier food options.

Analysts have been revising their outlooks on General Mills, reflecting varied perspectives on the company’s future performance. UBS initiated coverage with a Sell rating and a $54 price target, citing potential sales challenges and market share losses. Jefferies adjusted its price target to $59, maintaining a Hold rating, while noting issues with sales volumes and promotional effectiveness. Morgan Stanley (NYSE:MS) also initiated coverage with an Underweight rating and a $53 price target, expressing concerns about North American sales and pricing power. These developments highlight the challenges General Mills faces in navigating a competitive and evolving market landscape.

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