On Thursday, General Mills (NYSE:GIS) saw an increase in its price target from $65.00 to $70.00 by Mizuho, while the firm retained a Neutral rating on the stock. The adjustment comes after General Mills reported revenue and earnings per share (EPS) that exceeded expectations for the third fiscal quarter. The positive results were partly attributed to one-time factors, including cold weather and incentive compensation.
General Mills demonstrated signs of sequential improvement that could bode well for the fiscal year 2025. The company has experienced growth in the distribution share for U.S. retail and has shown strong efficiencies and early signs of revenue improvement in its Pet segment.
Moreover, General Mills has realized net productivity savings. Despite the challenging macroeconomic environment and limited short-term visibility, the low expectations for fiscal year 2025, including sales growth of 1.2%, EBIT increase of 1.5%, and EPS rise of 3.8%, coupled with improving execution, suggest that the risks to the next twelve months' EPS are skewed to the upside.
The valuation of General Mills stands at approximately 12.4 times the calendar year 2024 estimated EBITDA, which represents about a 10% premium compared to its U.S. Food peers. According to Mizuho, this valuation leads to a neutral risk/reward scenario. However, the firm has indicated a growing optimism for General Mills' performance moving forward.
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