Strong Brands Help General Mills Navigate Rough Waters, but We See Limited Upside in Shares

Our main takeaway from General Mills’ February-ended fiscal third-quarter report is that the firm continues to navigate a challenging environment well. Ingredient shortages for its dough, pizza, and hot snacks product lines caused the company’s on-shelf availability of these items to fall to 75% during the quarter, although this has since improved to 85%. Putting this into context, the shortages caused General Mills’ total U.S. retail on-shelf availability to fall into the low-90s from over 95% previously. Despite this, General Mills is gaining or maintaining market share in two thirds of its priority businesses, and management modestly increased fiscal 2022 organic sales growth guidance to 5%, up from 4%-5% previously, and its initial call for a 1%-3% drop in organic sales at the start of the fiscal year. We expect a modest bump to our $67 fair value estimate, given a slight increase in our fiscal 2022 organic sales estimate and the reversal of our prior assumption that the U.S. corporate tax rate would increase in 2022, leaving shares fully valued.