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General Mills Beats Estimate in Fiscal 4Q17, Stock Rises

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Part 5
General Mills Beats Estimate in Fiscal 4Q17, Stock Rises PART 5 OF 6

Analysts Remain Neutral on General Mills Stock after Earnings

Ratings and target price

Most of the analysts covering General Mills (GIS) maintained a “hold” on the stock after its fiscal 4Q17 earnings since the risk-reward remains balanced. The company is taking strategic measures to drive its top-line growth through the launch of new wellness products. However, organic sales are projected to decline as a soft sales environment continues to remain a drag. Despite lower sales, management is guiding for a YoY (year-over-year) improvement in margins. However, increased promotional spending planned for fiscal 2018 and input cost inflation will pressure its margins.

Analysts Remain Neutral on General Mills Stock after Earnings

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Analysts maintained a consensus rating of 3.2 on a scale of 1.0 (“strong buy”) to 5.0 (“strong sell”) for GIS stock. Of the 20 analysts who rated the company’s stock, 25.0% have recommended a “buy,” 65.0% recommended a “hold,” and 10.0% rated it a “sell.” As of June 28, 2017, General Mills stock was trading 2.4% below analysts’ 12-month price target of $57.78.

Recent analyst activity

Although the company managed to post better-than-expected fiscal 4Q17 results, its tepid sales outlook and increased competition might lead analysts to reduce their target prices for the stock. Following the fourth quarter earnings, Susquehanna lowered its target price on GIS stock to $58 from $59. However, it maintained its neutral outlook.

Peer comparison

Analysts are also maintaining a neutral outlook on Kellogg (K) and J.M. Smucker (SJM) since industry-wide softness is expected to restrict their growth. Of the analysts covering Kellogg (K) stock, 14.0% have recommended a “buy,” 72.0% have rated it a “hold,” and 14.0% have maintained a “sell” rating. In comparison, 26.0% of the 19 analysts covering J.M. Smucker stock have maintained a “buy” rating, and 58.0% have rated it a “hold.” About 16.0% have recommended a “sell.”

In contrast, analysts remain positive on ConAgra Brands (CAG) stock. About 64.0% of the 14 analysts covering the stock are recommending a “buy,” 22.0% are rating it a “hold,” and 14.0% are rating it a “sell.”

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