General Mills (GIS): A Strategic Buy Amid Recent Pullback

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General Mills (GIS, Financial) stands at #39 in the latest Yield Leaders rankings, presenting a valuable opportunity for investors after a recent dip post-Q3 (Feb) results. The company, a leading name in consumer packaged goods, saw its stock price surge initially due to positive Q3 trends but has since experienced a 10% decrease, touching its 200-day moving average (67.14). This pullback, coupled with the ongoing rise in food away-from-home prices versus the stable at-home prices, marks an excellent entry point, especially with an attractive 3.5% annual dividend yield.

GIS faces inflation as a persistent challenge, impacting at-home food prices and resulting in the company's 12th consecutive quarterly volume decline in Q3. Despite this, the decline was less severe than in previous quarters, indicating strong brand loyalty. Additionally, GIS's market share remains robust against private labels, underscoring the competitive strength of its brands even in an inflationary climate.

The company's Holistic Margin Management (HMM) initiative has been pivotal in addressing supply-side inflation pressures, leading to a significant gross margin improvement. By streamlining operations and reducing costs, GIS has managed to enhance its profitability amidst challenging conditions.

Looking ahead, GIS maintains its FY24 financial outlook, expecting organic net sales growth between -1% to 0% and adjusted EPS growth of +4-5% in constant currency. Despite facing tough year-over-year comparisons in the final quarter, the company anticipates brighter prospects in FY25 driven by improvements in its North America Retail and Pet segments, alongside volume growth and sustained brand loyalty. Investors are advised to implement a 15-20% stop loss to manage risks effectively.


I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.