General Mills (GIS) is facing a challenging setup heading into its fiscal Q4 results, and is expected to offer cautious guidance for fiscal 2026, UBS Securities said in an earnings preview.

The brokerage said in a Wednesday note that it expects the company's organic sales to remain under pressure, and while margin strength may lift Q4 earnings slightly above consensus, multiple headwinds could weigh on the year ahead.

The firm forecasts fiscal Q4 earnings of $0.73 per share, slightly above the consensus, driven by higher margins offsetting weaker-than-expected sales.

For fiscal 2026, UBS projects earnings to fall about 9% to $3.85, which is below consensus at $3.94. The analysts cited factors including cost inflation, increased brand spending, a reset in incentive compensation, and the divestiture of the North America yogurt business.

While the extra 53rd week in fiscal 2026 will add some revenue, UBS expects the yogurt deal's drag on North America retail and foodservice segments to more than offset that benefit. The sale to Lactalis recently secured regulatory approval and is expected to close by the end of June, according to a company statement.

The brokerage also flagged ongoing softness in organic sales trends, projecting a 3.4% year-over-year decline in Q4. Weakness is expected across all major segments, with North America retail down 4.5%, Pet down 3%, International down 2%, and Foodservice flat.

The stock's recent underperformance may have already factored in the negative sentiment, the investment firm said.

UBS has a sell rating on General Mills with a $52 price target.

Price: 53.01, Change: +0.05, Percent Change: +0.09