General Mills Results Encouraging, Shares Undervalued

We’re encouraged by wide-moat

We plan to adjust our near-term outlook to incorporate modest foreign exchange headwinds and a slightly higher degree of volume degradation in the North America retail segment, which should be largely offset by a stronger contribution from price/mix. We expect these revisions will shave about a dollar off our $58 fair value estimate. However, we're holding the line on our longer-term outlook for low-single-digit pro forma sales growth (with a 1% average contribution from price/mix) and gross margin in the mid-30s. Even with the mid-single-digit percentage uptick in the share price after the earnings release, we continue to think the name offers an attractive entry point.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.