Morgan Stanley Analyst Upgrades General Mills

NEW YORK (AP) — An analyst upgraded shares of General Mills Inc. on Tuesday and boosted his price target on the maker of Pillsbury bakery products and Cheerios cereal, saying that the food company should be able to boost sales despite a weak economy.

Last month, General Mills said its fiscal first-quarter profit jumped 51 percent because of a decline in ingredient costs and strong demand for its products.

Looking ahead, costs for ingredients used in its products should remain stable in the near term, General Mills said.

Morgan Stanley analyst Vincent Andrews upgraded the stock to "Overweight" from "Equal Weight" and raised his price target to $72 from $64. That implies shares have room to rise 12.6 percent from Monday's close of $63.96.

Andrews said Mills has top brands in strong categories — such as cereal, soup and yogurt — and limited exposure to the difficult Western European market.

Also, over the past three years, General Mills has boosted advertising as a percentage of sales to 5 percent from 4 percent, Andrews said. This increased focus came when some competitors, such as Campbell Soup Co. and Sara Lee Corp., lowered their spending on marketing and advertising.

"Despite the economic malaise of the past 12 months, Mills has increased both gross advertising (spending) and its innovation efforts," Andrews wrote in a client note, expecting this to boost sales.

Shares of the company inched up 95 cents to $64.91 in morning trading.