Why Analysts Have Cooled on General Mills Ahead of Earnings

As the third quarter of 2023 winds down, there are just a few earnings reports due out this week. After markets close Monday, Stitch Fix will report fiscal fourth-quarter results that are expected to be weak both sequentially and year over year.

Then, no notable earnings results are due until Wednesday morning. Here is a look at what analysts expect to hear when General Mills Inc. (NYSE: GIS) takes the stage.

Shares of the food products giant have declined by more than 12% over the past year. Since the beginning of 2023, the stock is down almost 21.5%. The Consumer Staples Select Sector SPDR Fund (NYSEAMERICAN: XLP) has dropped by just under 3% over the same period. Since July 24, the stock is down nearly 15%.

Gross profit fell by 2.1% in the prior quarter, and earlier this month, one analyst firm lowered the stock’s rating from Outperform to Neutral based on an expected decline in premium pet food sales and profits as consumers look for cheaper options to feed their pets. Operating profit in the company’s pet food segment rose 18% year over year in the fourth quarter but declined by 5% year over year.

Sentiment on the stock remains muted. Of 20 analysts covering the shares, 13 have Hold ratings, and only three rate it at Buy or Strong Buy. The stock trades at around $66.00, implying upside potential of 9.1% based on the median price target of $72.00. At the high target of $91.00, the implied upside is 37.9%.

For the first quarter of fiscal 2024, revenue is forecast at $4.91 billion, which would be down 2.5% sequentially but up 4.0% year over year. Adjusted EPS are forecast at $1.08, down 3.3% sequentially and 2.7% lower year over year. The current estimates for the fiscal year that ends next May call for EPS of $4.47, up 4.1%, on sales of $20.64 billion, up 2.7%.

General Mills stock trades at 14.7 times expected 2024 EPS, 13.9 times estimated 2025 earnings of $4.73 and 13.3 times estimated 2026 earnings of $4.97 per share. The 52-week trading range is $64.70 to $90.89. General Mills pays an annual dividend of $2.36 (yield of 3.58%). Total shareholder return for the past year was negative 9.86%.

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