Analysts maintain a ‘neutral’ view
Analysts gave the cold shoulder to General Mills’ (GIS) announcement of its Blue Buffalo acquisition. Its premium pricing and higher leverage ratio after the acquisition closes kept analysts on the sidelines, and most of them are maintaining a “neutral” outlook on the prospects for General Mills stock.
General Mills’ top line is expected to benefit from its expansion into the pet foods segment with the acquisition of high margin Blue Buffalo Pet Products. The pet foods category is growing at a healthy rate, with natural and wholesome pet foods seeing high demand. However, General Mills’ other traditional brands are seeing low demand, which is expected to restrain its upside growth rate.
Its margins are expected to remain low, given the higher costs stemming from inflation in commodity prices and higher transportation and logistics costs.
Recommendation summary and target price
Of the 20 analysts providing recommendations for General Mills stock, 75% have suggested a “hold,” 20% have recommended a “buy,” and 5% have rated it a “sell.” Analysts have a price target of $59.29 per share on GIS stock, which represents an upside of 11.9% to its closing price of $52.98 on February 23, 2018.