General Mills price target lowered to $50 from $52 at TD Cowen

TD Cowen lowered its price target on General Mills to $50 from $52, maintaining a Hold rating, citing approximately 6% cost of goods sold inflation in fiscal year 2026 and a planned 1% price decrease to fund investments. The firm forecasts a below-consensus EPS of $3.70 for fiscal year 2026 and a 12% operating profit decline, driven by core business challenges and the Yoplait divestiture. General Mills faces multiple analyst downgrades and price target reductions from firms like BofA Securities, Goldman Sachs, and Citi, reflecting concerns over cost pressures, brand investments, and the yogurt business sale, despite a $130 million cost-reduction plan.

Analysis

General Mills (GIS) is confronting significant financial headwinds, as highlighted by TD Cowen's price target reduction to $50.00 from $52.00, while maintaining a Hold rating. The company is anticipated to experience approximately 6% cost of goods sold inflation in fiscal year 2026, with 1.2% stemming directly from tariffs. Concurrently, General Mills plans a 1% price decrease to fund investments in strategic categories such as snacks, pet food, and dough, a move that, combined with inflation, is expected to pressure profitability despite a current gross margin of 35.4%. TD Cowen projects a fiscal year 2026 earnings per share of $3.70, notably below the consensus estimate of $3.99, and forecasts a 12% decline in operating profit for the same year, attributed equally to core business challenges and the Yoplait divestiture. This outlook persists even considering the company's $130 million cost-reduction plan, which is not expected to fully counteract the adverse financial pressures. The sentiment is echoed by other analysts, with BofA Securities, Goldman Sachs, and Citi all issuing downgrades or price target reductions, citing concerns over cost pressures, the impact of the U.S. yogurt business sale, and investments in brands. Consequently, TD Cowen anticipates a contraction in General Mills' valuation multiple towards industry peer levels, as organic growth is projected to remain at or below competitors for a third consecutive year. Despite the stock trading near its 52-week low and an InvestingPro Fair Value model suggesting it is slightly undervalued, the overarching sentiment for GIS is strongly negative, with a specific ticker sentiment score of -0.8.

Key Decisions for Investors

• Investors should exercise caution given the multiple headwinds including significant cost inflation, planned price reductions, and the financial impact of the Yoplait divestiture, which are collectively expected to lead to a 12% operating profit decline in fiscal year 2026.
• Despite the stock trading near its 52-week low, the series of analyst downgrades and below-consensus earnings forecasts suggest that a re-evaluation of valuation multiples is likely; monitor for stabilization in organic growth and margin erosion before considering new long positions.
• Closely track the effectiveness of the announced $130 million cost-reduction plan and the returns on investment in key growth categories (snacks, pet food, dough) as critical indicators of the company's ability to navigate the current challenging environment and offset projected profit declines.