General Mills: Shares Look Undervalued as Market Price Underappreciates Portfolio of Strong Brands

After updating our forecasts for slightly higher sales growth and operating margin, we have raised our fair value estimate for General Mills to $80 per share from $78. Shares look undervalued as we think the market is overweighting the near-term volume challenges and the longer-term secular decline of cereal. As the rapid price increases of the recent past slow, we think consumers will return to more normalized buying patterns. Moreover, even as cereal consumption continues to slowly decline, we see General Mills continuing to hold a dominant share.