General Mills (NYSE:GIS) delivered mixed Q4 financial results on June 28. While volumes continue to be in negative territory, management said that it expects Fiscal 2024 organic sales growth to be 3-4%. In response to the processed food maker’s newly issued guidance, Goldman Sachs analyst Jason English said that GIS’ organic sales growth guidance could prove to be “optimistic.”
Revisiting Q4 Performance
General Mills delivered net sales of about $5 billion in Q4, up 3% year-over-year. Net sales were driven by higher pricing. While GIS’ sales improved, it missed the Street’s forecast.
While its sales lagged analysts’ estimates, its adjusted earnings of $1.12 a share came ahead of the consensus estimate of $1.06 and improved by 1% on a constant currency basis. GIS’ bottom line benefitted from a lower outstanding share count as the benefits of higher organic sales were offset by higher input costs and selling, general, and administrative expenses.
Nonetheless, GIS announced a 9% increase in its quarterly dividend to $0.59 per share. It’s worth highlighting that General Mills has paid uninterrupted dividends for 124 years.
GIS Could Find it Hard to Drive Growth
Investors should note that General Mills’ organic sales in Fiscal 2023 were primarily driven by aggressive pricing, especially in North America. For instance, GIS’ organic sales increased by 10% in Fiscal 2023, reflecting a 14% increase in pricing partly offset by a 4% decline in volumes.
As for Fiscal 2024, management expects pricing to be a key driver of organic sales growth. However, English highlighted that the company’s outsized price growth is bringing challenges for the company by hurting its market and leading to volume share losses in specific categories.
Citing retail market share data, the analyst said that the company could find it hard to drive growth ahead and would require incremental investments to drive market share.
Following the Q4 print, the analyst maintained a Sell rating on General Mills stock. However, he raised the price target to $77 from $76.
Is General Mills a Buy, Hold, or Sell?
Given the near-term challenges, analysts prefer to remain sidelined on General Mills stock. It has received two Buy, five Hold, and one Sell recommendations for a Hold consensus rating. Analysts’ average price target of $84.25 implies 9.81% upside potential.
Investors should note that Laurent Grandet of Guggenheim is the most accurate analyst for GIS stock, according to TipRanks. Copying Grandet’s trades on GIS stock and holding each position for one year could result in 83% of your transactions generating a profit, with an average return of 13.15% per trade.
