BofA Securities analyst Peter T. Galbo has upgraded General Mills, Inc. from a Neutral rating to a Buy, increasing the price forecast for the company to $80 from $78. Galbo anticipates that General Mills will see a return to organic sales growth at a more rapid and consistent pace compared to other companies in the center-store food sector. This positive outlook is driven by factors such as the expected re-acceleration in the Pet segment, particularly with the Blue Buffalo brand, and the stabilization in North America Retail as prior issues in the dough category are being resolved.
Galbo's analysis suggests that investing in General Mills offers exposure to the recovery of the U.S. Pet market and a potential surge in value stocks. The fundamentals of General Mills are deemed more appealing than those of its competitors in the food industry. The analyst specifically expresses optimism about the turnaround of Blue Buffalo, following a challenging fiscal year 2024 that experienced a -4% organic growth. Initiatives within the dog food segment, such as the success of the Life Protection Formula and the signs of stabilization in the Wilderness line, have contributed to this positive sentiment.
General Mills' pet segment has shown faster growth since FY19, averaging +8.7% compared to the overall portfolio's average of +4.7%. Galbo believes that if the pet segment continues to outpace the company's overall portfolio, its valuation will also increase accordingly. The analyst points out that the challenges in the pet treats category may be offset by easier comparisons in the second half of the year, potentially leading to a more significant recovery for that segment. At the time of the report, General Mills' shares were trading higher by 1% at $66.74.