General Mills (GIS) Stock May Fall Lower Today on Analyst Downgrade

NEW YORK (TheStreet) -- Shares of General Mills Inc.  (GIS) are lower by 1.25% to $50.72 in early market trading Monday after the packaged food maker had its rating cut to "sector perform" from "outperform" at RBC Capital Markets this morning.

Analysts at the firm also lowered the price target to $54 from its previous $58.

On Friday, the company lowered its sales and profit outlook for the year, citing sales weakness in the U.S. food industry as well as slowing growth in key emerging markets.

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General Mills cut its sales guidance for the year ending in May to a low single-digit growth rate, compared with its previous forecast for growth in the mid-single digits.

The company also cut its fiscal second-quarter earnings outlook to a range of 75 cents to 77 cents per share for the period, lower than the 88 cents per share analysts are expecting.

Separately, TheStreet Ratings team rates GENERAL MILLS INC as a "buy" with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENERAL MILLS INC (GIS) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Food Products industry and the overall market, GENERAL MILLS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • GENERAL MILLS INC's earnings per share declined by 21.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GENERAL MILLS INC increased its bottom line by earning $2.83 versus $2.79 in the prior year. This year, the market expects an improvement in earnings ($2.98 versus $2.83).
  • 37.23% is the gross profit margin for GENERAL MILLS INC which we consider to be strong. Regardless of GIS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.08% trails the industry average.
  • GIS, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 2.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, GIS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: GIS Ratings Report

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