General Mills Displays Pricing Prowess While Pet Volumes Improve; Shares Fairly Valued

We plan to raise our $75 fair value estimate for narrow-moat General Mills by a low-single-digit percentage after incorporating strong third-quarter performance and a modest lift to our fiscal 2023 outlook. General Mills’ astute pricing power, which underpins its narrow moat, was on full display as organic net sales jumped 16% (price/mix up 16%, volumes flat), edging our 9% preprint estimate. Mix benefits, coupled with progress in cost-savings initiatives, eased the blow from a midteens rise in input costs, benefiting adjusted gross and operating margins by 240 and 80 basis points, respectively, to 33.8% and 15.7%.