RBC Capital reiterates General Mills stock rating, cites ongoing turnaround

General Mills (GIS) is navigating a challenging packaged food market, with RBC Capital maintaining a Sector Perform rating and $67 price target, citing ongoing turnaround efforts and low expectations for upcoming Q4 earnings following a 2.62% revenue decline. While the stock offers a 4.53% dividend yield near its 52-week low, recent analyst actions include price target reductions from TD Cowen and BofA, and a Goldman Sachs downgrade to Neutral, reflecting concerns over cost inflation, divestiture impacts, and limited near-term upside. The company's strategic focus is on its "Remarkable Experience Framework" to drive positive sales growth, supported by pet food portfolio expansion and a $130 million cost-reduction plan.

Analysis

General Mills (GIS) faces a challenging period, characterized by a soft packaged food market and a turnaround strategy that remains a work in progress. The company's stock is trading near its 52-week low, reflecting a 2.62% decline in last-twelve-months revenue and cautious analyst sentiment ahead of its fourth-quarter earnings report. Multiple firms have tempered expectations, with Goldman Sachs downgrading the stock to Neutral and reducing its price target to $58, while TD Cowen and BofA Securities also lowered their targets, citing cost inflation and the dilutive earnings impact of the U.S. yogurt business divestiture, estimated at $0.18 per share. Despite these headwinds, the stock offers a compelling 4.53% dividend yield, underpinned by 55 consecutive years of payments. Management's strategic response hinges on its "Remarkable Experience Framework" to restore growth, an expansion of its pet food portfolio with new product launches, and a $130 million cost-reduction plan set for completion by fiscal 2028. However, RBC Capital projects that fiscal 2026 organic sales will be approximately flat, underscoring that a return to positive top-line growth is not an immediate expectation.

Key Decisions for Investors

• Income-oriented investors might find the 4.53% dividend yield attractive, especially with the stock near its 52-week low, but must weigh this against the fundamental challenges of declining revenue and operational headwinds.
• Investors should closely monitor the upcoming Q4 earnings call for management's fiscal 2025 guidance, as any signs of traction from the "Remarkable Experience Framework" or pet food expansion could serve as a catalyst against the current negative sentiment.
• Given the recent analyst downgrades and price target cuts citing limited near-term upside, it may be prudent to await tangible evidence of a sales recovery before establishing or adding to a position, as a turnaround is not expected to materialize in the immediate future.