Skip to Content
Stock Analyst Update

General Mills Results Encouraging, Shares Undervalued

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.


We’re encouraged by wide-moat  General Mills' (GIS) second-quarter results, which included 5% sales growth (a 1% decline on an organic basis) and a 2% improvement in organic price/mix. Year to date, price/mix has contributed around 2 points of sales growth, standing above the 1% contribution in fiscal 2018 and our roughly 1% full-year expectation, as the firm bolsters innovation across its categories. This supports our contention that consumer goods companies can leverage pricing to help offset broader secular declines in their categories, so long as they are able to bring new, value-added products to market (justifying a price premium) and ensure their portfolio of brands continues to resonate with evolving consumer preferences. This improvement in pricing, coupled with the firm's ongoing cost-saving initiatives, also had a favorable impact on profitability, with adjusted operating margin increasing 40 basis points to 17.3% despite input cost inflation. Year to date, this metric is tracking at 16.5%, in line with our full-year outlook.

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.

Sonia Vora does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.