Friday, BofA Securities upgraded General Mills (NYSE:GIS) stock from a Neutral to a Buy rating, with a price target increase to $80 from the previous $78. The revision reflects an anticipated 21% upside, now based on 17 times the calendar year 2026 estimated earnings per share (EPS), an update from the prior calendar year 2025.
The $36.83 billion market cap company currently trades at 15.71 times earnings, with InvestingPro analysis indicating the stock is slightly undervalued based on its Fair Value model.
The analyst noted that General Mills is expected to achieve organic sales growth more rapidly and sustainably compared to its peers in the center-store food category. This outlook is supported by two main factors: a projected re-acceleration in the Pet segment, particularly with the Blue Buffalo brand, and a stabilization in North American Retail (NAR) as issues related to dough products are expected to diminish.
With annual revenue of $19.8 billion and a GOOD Financial Health Score according to InvestingPro, the company demonstrates solid fundamentals.
General Mills is seen as providing investors with the opportunity to benefit from a recovery in the US Pet sector and an increase in value stocks. The fundamentals of the company are considered more appealing when compared to its food industry peers. Notably, the company has maintained dividend payments for 54 consecutive years, currently offering a 3.63% yield, with relatively low price volatility compared to the market.
The upgrade is further justified by scanner data that suggests the potential for positive earnings revisions. This data could contribute to General Mills' valuation moving closer to its historical average multiple of around 17 times, compared to the current multiple of approximately 14 times.
The analyst's comments highlight the company's stronger position and the likelihood of a positive shift in investor sentiment. Investors can find additional insights and 6 more exclusive ProTips about General Mills in the comprehensive Pro Research Report available on InvestingPro.
In other recent news, General Mills has made several significant financial and strategic moves. The company has issued $1.5 billion in new notes, a move conducted under an underwriting agreement with Barclays (LON:BARC) Capital Inc., Citigroup (NYSE:C) Global Markets Inc., J.P. Morgan Securities LLC, and Wells Fargo (NYSE:WFC) Securities, LLC. The proceeds from this offering are expected to be used for general corporate purposes, potentially including debt repayment or funding capital expenditures.
General Mills has also announced the acquisition of Whitebridge Pet Brands' North American operations for $1.45 billion, a strategic move to expand its presence in the pet food market. The acquisition includes premium cat food and pet treat brands Tiki Pets and Cloud Star and is expected to close in the third quarter of fiscal 2025.
In addition, General Mills has secured a new five-year credit facility amounting to $2.7 billion, replacing its previous agreement. This financial move is anticipated to support the company's ongoing operational and strategic initiatives.
In its annual shareholder meeting, all director nominees were elected, and executive compensation was approved. However, two proposals concerning environmental and sustainability issues failed to pass.
During its First Quarter Fiscal 2025 Earnings Conference Call, General Mills reported a slight increase in at-home food consumption and expressed interest in making smaller acquisitions in the $1 billion to $2 billion range. These recent developments reflect General Mills' proactive approach to governance and strategic planning.
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