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On Monday, Morgan Stanley (NYSE:MS) initiated coverage on General Mills shares (NYSE: NYSE:GIS) with an underweight rating, setting a price target of $53.00. The stock, currently trading at $58.64 and near its 52-week low of $55.15, has seen its share price decline by 12% over the past year. According to InvestingPro data, 14 analysts have recently revised their earnings estimates downward for the upcoming period. The decision comes amidst concerns about the company’s North American sales and pricing power, particularly in contrast to its peers. The research firm expressed the belief that General Mills’ sales within North America would likely continue to fall behind competitors due to less favorable category exposure and limited ability to adjust prices.
Additionally, Morgan Stanley anticipates that the company will face ongoing challenges within the pet food sector. Despite these issues, the valuation of General Mills in comparison to other food industry peers is not considered particularly high, with the stock trading at a P/E ratio of 12.9x. InvestingPro analysis suggests the stock is currently fairly valued, with additional insights available in the comprehensive Pro Research Report, which covers over 1,400 US stocks. Analysts at Morgan Stanley noted that while recent substantial guidance reductions by the company may suggest that estimates are approaching a low point, they still foresee these factors negatively impacting investor sentiment going forward.
The coverage initiation reflects a cautious stance towards General Mills, with the analyst team recognizing the company as a quality asset with effective leadership. However, the underlying concerns about specific market segments and competitive dynamics appear to be driving the underweight rating and the set price target.
General Mills’ stock price will be closely watched by investors following this new coverage, as the market evaluates the company’s potential to navigate the identified headwinds. The price target of $53.00 suggests a cautious outlook on the company’s near-term performance in relation to its industry counterparts. Despite the challenges, the company maintains a solid 4.09% dividend yield and has maintained dividend payments for 55 consecutive years, demonstrating long-term financial stability.
In other recent news, General Mills has reported a series of financial adjustments and challenges following its latest earnings report. The company experienced a miss in third-quarter sales and subsequently lowered its earnings per share (EPS) guidance for fiscal year 2025, with potential further declines anticipated in 2026. Analysts from TD Cowen, RBC Capital Markets, Bernstein SocGen Group, Mizuho (NYSE:MFG) Securities, and Barclays (LON:BARC) have all revised their price targets for General Mills, reflecting ongoing difficulties in the packaged food sector. TD Cowen cut its target to $57, citing a contraction in margins and increased investments in pricing and marketing. RBC Capital Markets adjusted its target to $67, noting challenges in consumer behavior and inventory management. Bernstein reduced its target to $62, highlighting shifts towards value shopping and health trends. Mizuho lowered its target to $60, pointing out weaker sales in the snacks category and inventory reductions. Barclays also adjusted its target to $60, as General Mills plans to increase trade and media spending to enhance consumer value. These developments indicate a strategic focus on marketing and pricing adjustments amid evolving consumer preferences and economic pressures.
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