General Mills: Pet Segment Rebound and Retail Growth Drive Stock Upgrade

General Mills, Inc. (GIS) has received a stock upgrade from BofA Securities analyst Peter T. Galbo, who raised his price forecast to $80 from $78 and upgraded the stock to Buy from Neutral. Galbo's optimism is driven by the expected return to organic sales growth at a faster and more sustainable rate compared to other center-store food peers. This growth is anticipated to be fueled by the re-acceleration in the Pet segment, specifically Blue Buffalo, and the stabilization in North America Retail, as issues in the dough category are moving behind the company.

Galbo highlights that General Mills offers investors exposure to the recovery in the U.S. Pet market and a surge in value stocks, with its fundamentals appearing more attractive when compared to other food industry peers. The analyst expresses increasing optimism about the turnaround of Blue Buffalo following a challenging FY24, which saw a -4% organic growth. Initiatives in the dog food segment, such as the Life Protection Formula experiencing high-single-digit percentage growth and the Wilderness line showing signs of stabilization, are fostering greater confidence. While the pet treats category remains a challenge, the second half of the year offers easier comparisons, which could lead to a more pronounced recovery.



Since FY19, the pet segment has experienced a faster growth rate (averaging +8.7%) compared to the overall General Mills portfolio (averaging +4.7%), contributing to valuation gains. If pet growth continues to lead the overall portfolio, the analyst believes valuation should rise accordingly. Price Action: GIS shares are trading higher by 1% to $66.74 at last check Friday.

General Mills' North America Retail segment has seen market share gains in most categories, driven by stabilization and strategic initiatives. In Q1 2025, the segment's operating profit increased by 3% to $798 million, with organic net sales growing 4% year over year. This growth was primarily due to positive net price realization and mix, offsetting reduced pound volume. The segment's strength is expected to continue in Q2, contributing to General Mills' overall growth.

General Mills has implemented several strategies to stabilize and grow its North America Retail segment. One key strategy is focusing on value offerings, such as compelling offers, convenient pack sizes, and affordable price points, to cater to consumers seeking value amidst inflation. Additionally, the company has been prioritizing brand-building and product innovation as part of its Accelerate strategy, reshaping its portfolio through acquisitions and divestitures. For instance, General Mills' acquisition of Whitebridge Pet Brands' North American premium Cat feeding and Pet treating business for $1.45 billion is expected to complement its Blue Buffalo portfolio and drive growth in the Cat feeding and Treats segments. These strategies have been effective, as the North America Retail segment saw market share gains in most of its categories in the US during the first quarter, with expectations to continue this improvement in the second quarter.

In conclusion, General Mills' stock upgrade by BofA Securities reflects the company's potential for growth in the Pet segment and the stabilization of its North America Retail segment. As the company continues to implement strategic initiatives and adapt to market trends, investors can expect to see further progress in its financial performance.