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General Mills shares have been upgraded to buy from neutral by UBS.
Daniel Acker/Bloomberg
General Mills
It has underperformed other large-cap stocks, a level UBS analysts call an “attractive entry point” for investors.
UBS analyst Cody Ross said:
General Mills
(ticker: GIS), owner of the Betty Crocker, Nature Valley, Blue Buffalo, and Pillsbury brands, has offered a Buy from Neutral, raising its target price from $85 to $88. Ross said he sees a potential recovery in profit margins within the company’s pet division.
“There is growing concern among investors that additional pet food supplies could put downward pressure on pricing power, reduce sales growth and potentially realign profit margins.” the analyst wrote in a research note.
But with General Mills holding only one-third of the market share, he said there is room for growth in the premium segment of dog food, adding that he thinks “bear talk is overkill.” .
As more consumers shop online, some of them buying more expensive foods, “supply of premium dog food is likely to be absorbed by demand,” the analyst added.
General Mills (Ticker: GIS) shares rose 1.1% to $77.63 on Friday. The stock has fallen 7.4% this year.
Write to Emily Dattilo at emily.dattilo@dowjones.com.
