General Mills (GIS) is compelled to make "price investments" and increase marketing in a difficult operating environment for packaged food, which could impact profitability, RBC Capital Markets said in a note Thursday.
The company reported fiscal Q3 total organic growth was minus 5%, below the minus 2.9% consensus, as all segments missed expectations. Management also identified weaknesses in its snacks and cereal categories, RBC analysts said.
The company said it may need to make price investments in its North American portfolio to bring more value for the money spent by customers, but the analysts said that the move could also be implemented in other segments. The company will work to regain volume share as it realigns more with value.
Based on Q3 results and lower fiscal 2025 guidance, RBC said it was now modeling full-year organic growth of minus 1.8%, down from minus 0.5%, and earnings of $4.19 per share, down from $4.35.
RBC lowered the price target to $67 from $70 for General Mills and maintained rating at sector perform.
Price: 58.73, Change: -0.47, Percent Change: -0.79
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