Piper Sandler has increased its price target on shares of General Mills (NYSE: NYSE:GIS) to $84.00, up from the previous $74.00, while maintaining an Overweight rating on the stock.
The firm's analyst cited the company's efforts to enhance its brand appeal to value-seeking consumers as a key factor in the decision. General Mills is expected to boost media investment for its Blue Buffalo pet foods by double digits in fiscal year 2025.
The update to Piper Sandler's model follows General Mills' decision to divest its yogurt business, which is anticipated to result in a roughly 3% earnings per share (EPS) dilution.
The transaction is expected to close in the first quarter of fiscal year 2026. Despite the dilution, Piper Sandler kept its fiscal year 2025 earnings per share estimate unchanged at $4.47 but reduced the fiscal year 2026 estimate from $4.71 to $4.57.
The decision to offload the yogurt segment, described as low margin and showing little to no growth, is viewed positively by the analyst. The divestiture is expected to streamline the company's portfolio, though it may lead to near-term costs.
Looking forward to 2026, Piper Sandler applied a price-to-earnings multiple of approximately 17.5 times to General Mills' stock, an increase from the previous multiple of around 16 times. This adjustment reflects an improved margin and growth outlook for the company's portfolio.
In other recent news, Goldman Sachs (NYSE:GS) raised its price target for the company to $81, citing effective execution of its strategic plan and potential for sustained improvement. Mizuho also increased its target to $72, noting increased home food demand and market share gains in key retail categories. However, it maintained a neutral stance, citing a narrowing gap between productivity savings and cost inflation.
Citi, on the other hand, slightly reduced its target to $75 but maintained a neutral rating. The firm acknowledged General Mills' initial progress but highlighted significant work ahead for the company to meet its fiscal year 2025 operational sales growth targets.
General Mills recently reported its first volume growth in six quarters in its Pet segment and exceeded consensus estimates for its first-quarter sales and earnings per share for fiscal year 2025.
The company also sold its North American Yogurt business to French dairy companies Lactalis and Sodiaal for $2.1 billion, a move projected to dilute its adjusted earnings per share by 3 percent in the first 12 months post-closure.
Finally, General Mills has appointed Asheesh Saksena as Chief Strategy & Growth Officer and is considering potential mergers and acquisitions in the $1 billion to $1.5 billion range.
InvestingPro Insights
With Piper Sandler's recent price target increase for General Mills (NYSE:GIS), investors may be seeking additional data points to inform their decisions. According to InvestingPro data, General Mills boasts a market capitalization of $41.69 billion and a P/E ratio of 17.74, which aligns with Piper Sandler's application of a 17.5 times multiple. Notably, the company's P/E ratio based on the last twelve months as of Q4 2024 stands at a slightly lower 15.4.
InvestingPro Tips reveal that General Mills has been actively engaged in share buybacks and has consistently raised its dividend for four consecutive years, with a current dividend yield of 3.2%. Additionally, General Mills has maintained dividend payments for an impressive 54 consecutive years. Analysts have also revised their earnings estimates upwards for the upcoming period, reflecting optimism about the company's profitability, which has been confirmed over the last twelve months.
These insights underscore General Mills' strategic financial management and its commitment to shareholder returns. With the company trading near its 52-week high and analysts predicting profitability for this year, investors might perceive the stock as a potentially stable addition to their portfolios. For those interested in further analysis, InvestingPro offers additional tips on General Mills at https://www.investing.com/pro/GIS.
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