UBS initiates General Mills stock with sell rating, $54 target

Wednesday, UBS analysts initiated coverage on General Mills stock (NYSE:GIS) with a Sell rating, setting a price target of $54.00. The firm’s analysis indicates potential headwinds for the company, suggesting a challenging environment ahead. This bearish outlook aligns with broader market sentiment, as InvestingPro data shows 15 analysts have recently revised their earnings estimates downward. The stock currently trades near its 52-week low of $55.15, with an average analyst target of $72.11.

The UBS analysts highlight that their negative outlook is based on projections that General Mills will face a difficult sales landscape. They predict an organic growth decline of 0.2% in fiscal year 2026, which contrasts with the company’s own annual growth target of 2-3%. The analysts believe that market share losses will likely outweigh the benefits of category growth.

In addition to sales challenges, UBS points to several other factors that could impact General Mills’ financial performance. They mention the negative effects of reinvestment, the implications of yogurt business divestitures, and a reset in incentive compensation as potential obstacles that could lead to a bottom line that falls short of expectations.

The UBS analysts assert that the current stock price does not reflect the potential downside. They note that General Mills shares are trading at levels roughly equivalent to their historical averages, suggesting that the market has not yet accounted for the risks identified in their analysis.

The UBS price target of $54.00 implies a 6% downside from the stock’s current trading level. This valuation is based on their cautious view of General Mills’ future earnings, which they believe will underperform compared to wider market expectations.

In other recent news, General Mills has made headlines with several significant developments. The company announced the sale of €750 million in notes due 2032, with a 3.600% interest rate, as part of its capital management strategy. This move is intended to raise funds for various corporate purposes, such as refinancing existing debt and funding capital expenditures. Additionally, Jefferies has revised its price target for General Mills to $59, maintaining a Hold rating due to challenges in the food sector and planned increases in trade and advertising spending.

Morgan Stanley (NYSE:MS) has also initiated coverage on General Mills with an underweight rating, setting a price target of $53, citing concerns about North American sales and pricing power. The firm noted ongoing challenges in the pet food sector and less favorable category exposure compared to competitors. Furthermore, TD Cowen has lowered General Mills’ stock target to $57, maintaining a Hold rating following a miss in third-quarter sales and a lower earnings per share guidance for fiscal year 2025.

The firm anticipates a reduction in core operating profit and margin contraction as the company adjusts its pricing strategies. These recent developments highlight the challenges and strategic moves General Mills is navigating in the current market environment.

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