Piper Sandler Boosts General Mills Price Target Amid Growth Plans
Piper Sandler Adjusts General Mills Price Target
Piper Sandler has raised its price target for General Mills (NYSE: GIS) to $84.00 from the previous target of $74.00. This change comes alongside a maintained Overweight rating for the stock, reflecting a positive outlook on the company's future performance.
Brand Enhancement Strategies
The firm's analysts attribute their decision to General Mills' initiatives aimed at boosting brand appeal, particularly among value-driven consumers. A significant part of their strategy includes increasing media investment for its Blue Buffalo pet food line, expected to see a substantial double-digit growth in fiscal year 2025.
Divestiture of Yogurt Business
The update to Piper Sandler's assessment follows General Mills' strategic decision to divest its yogurt business. This decision is anticipated to lead to approximately 3% dilution in earnings per share (EPS). The completion of this transaction is expected in the first quarter of fiscal year 2026. Despite this dilution, Piper Sandler has left its EPS estimate for fiscal year 2025 unchanged at $4.47 but has slightly adjusted its fiscal year 2026 estimate from $4.71 to $4.57.
Analyst Views on Market Position
The analyst's perspective on the yogurt segment's divestiture underscores its low margin and stagnant growth. This divestiture is viewed positively as a move that could streamline General Mills' portfolio, even though it may incur short-term costs.
Future Performance Projections
Looking ahead to 2026, Piper Sandler applied a price-to-earnings (P/E) multiple of approximately 17.5 times to General Mills' stock. This reflects an improvement from the previous multiple of around 16 times, suggesting a more favorable margin and growth outlook for the company's overall portfolio.
Other Analysts' Perspectives
In other recent developments, Goldman Sachs has also increased its price target for General Mills to $81, citing effective execution of strategic initiatives alongside expectations of sustained improvement in the company's performance. Mizuho likewise raised its target to $72, supported by increasing home food demand and gains in market share within key retail categories. However, they maintain a neutral stance, noting the challenges posed by the narrowing gap between productivity savings and rising cost inflation.
Citi adjusted its target slightly downward to $75 while still keeping a neutral rating. The firm highlighted General Mills' preliminary progress but also pointed out that substantial work remains for the company to achieve its fiscal year 2025 sales growth goals.
Positive Developments in General Mills' Segments
General Mills has recently reported its first volume growth in six quarters, specifically in its pet segment. This growth is a sign of improving performance and came alongside a favorable earnings report that exceeded expectations for the first quarter of fiscal year 2025.
Recent Strategic Decisions
The company has also finalized the sale of its North American yogurt business to Lactalis and Sodiaal, two French dairy companies, for $2.1 billion. This transaction is projected to dilute General Mills’ adjusted EPS by 3% during the first year following its completion.
Leadership Changes and Future Strategies
In a move to strengthen its executive team, General Mills has appointed Asheesh Saksena as Chief Strategy & Growth Officer. The company is also exploring potential mergers and acquisitions valued between $1 billion and $1.5 billion to further bolster its growth strategy.
Frequently Asked Questions
What is Piper Sandler's new price target for General Mills?
Piper Sandler has increased its price target for General Mills to $84.00.
Why did General Mills decide to divest its yogurt business?
The divestiture was due to the yogurt segment's low margins and lack of growth, streamlining the company's portfolio.
What impact will the divestiture have on earnings per share?
The divestiture is expected to result in a roughly 3% EPS dilution initially.
Who was appointed as Chief Strategy & Growth Officer at General Mills?
Asheesh Saksena has been appointed as the Chief Strategy & Growth Officer.
What are the long-term projections for General Mills' P/E ratio?
Analysts suggest a P/E ratio of around 17.5 times reflecting a positive growth outlook.
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