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Investing.com -- Goldman Sachs downgraded shares of General Mills (NYSE:GIS) and Conagra Brands (NYSE:CAG), citing ongoing cost pressures and sluggish demand for packaged food products, while maintaining its Sell rating on Kraft Heinz (NASDAQ:KHC).
The brokerage cut General Mills to Neutral from Buy and lowered its 12-month price target to $58.
It also downgraded Conagra to Sell from Neutral” with a $21 target. Kraft Heinz’s price target was reduced to $25.
“We see limited upside potential for our estimates of related companies in the near term, while ongoing portfolio refinement could weigh as well,” analysts wrote, pointing to persistent headwinds such as higher raw material and tariff costs, increased marketing investment, and a shift in consumer preferences toward fresh foods and private label products.
Goldman said General Mills remains better positioned than its peers due to a more premium portfolio, including brands like Blue Buffalo and Annie’s, and a proactive investment strategy.
However, it warned that pressures will likely persist, making it difficult to regain investor confidence without several quarters of consistent execution.
Sales trends for General Mills have slowed, the note added, with continued dollar share losses and narrowing price gaps versus private label in categories like cereal and pet food.
While some volume share improvement has emerged where the company has invested, private label trends still outpace GIS across key segments.
Goldman also noted that Conagra and Kraft Heinz face similar industry dynamics but with less pricing power and brand strength.
The firm said it could turn more constructive if the companies demonstrate improvement in market share, sales growth, or if commodity costs ease.
The note added that lower Treasury yields could help sentiment toward these food stocks, which historically show high sensitivity to interest rate moves.
However, it cautioned that current yield spreads are already narrower than average.