General Mills' 22% Share Price Slide Raises Questions About Value and Opportunity

General Mills' share price has fallen 22% this year and 30.7% over the last 12 months, raising questions about whether the food leader is an overlooked opportunity or a value trap. The company's DCF analysis suggests an intrinsic value of $111.21 per share, nearly double the current price of $49.56, indicating a significant undervaluation. However, investors should consider multiple valuation approaches and a holistic view before deciding whether to invest.

General Mills (GIS) has seen its share price tumble, dropping 22% this year and 30.7% over the last 12 months. This significant decline has sparked debate among investors about whether General Mills is an overlooked opportunity or a value trap. To provide a clearer picture, let's delve into the company's recent financial performance and analyst sentiments.

Recent Earnings and Analyst Estimates

General Mills will report its Q3 earnings this Wednesday before the market opens. Analysts expect revenues to decline 7% year over year to $4.51 billion, while adjusted earnings are anticipated to be $0.82 per share General Mills (GIS) Q3 Earnings Report Preview: What To Look For^[1]. This quarter, analysts have grown increasingly bearish, with five downward revisions to revenue estimates in the past 30 days.

Analyst Sentiment and Price Targets

Analysts covering General Mills have mixed opinions regarding its future prospects. Morgan Stanley has lowered its price target to $48.00, maintaining an Underweight rating, while Piper Sandler remains Overweight with a $60 price target Morgan Stanley lowers General Mills stock price target to $48 on pet food launch outlook^[2]. UBS, JPMorgan, and Jefferies have also expressed concerns, with UBS reiterating a Sell rating and JPMorgan downgrading to Underweight due to growth concerns.

Valuation and Intrinsic Value

A Discounted Cash Flow (DCF) analysis suggests that General Mills is significantly undervalued. The intrinsic value calculated is $111.21 per share, nearly double the current price of $49.56. However, investors should consider multiple valuation approaches and a holistic view before deciding whether to invest.

Expansion and Innovation

General Mills has announced a significant $54 million investment to expand its James Ford Bell Technical Center in Golden Valley, Minnesota. This expansion marks the largest investment in the facility since its original construction and signals the company's commitment to innovation and growth.

Conclusion

General Mills' recent financial performance and analyst sentiments paint a mixed picture. While the company's share price has fallen significantly, a DCF analysis suggests it is undervalued. However, investors should consider multiple valuation approaches and the company's future prospects before making a decision. The upcoming earnings report and investor day in mid-October could provide further clarity.

References
General Mills (GIS) Q3 Earnings Report Preview: What To Look For^[1] https://www.tradingview.com/news/stockstory:7b6576f67094b:0-general-mills-gis-q3-earnings-report-preview-what-to-look-for/
Morgan Stanley lowers General Mills stock price target to $48 on pet food launch outlook^[2] https://www.investing.com/news/analyst-ratings/morgan-stanley-lowers-general-mills-stock-price-target-to-48-on-pet-food-launch-outlook-93CH-4238154