General Mills Inc (NYSE:GIS, ETR:GRM) is headed for a challenging year, according to UBS, which initiated coverage on the packaged food giant with a ‘Sell’ rating and a 12-month price target of $54.
In a note to clients, analysts said both sales and earnings expectations for the maker of Cheerios and Pillsbury appear too high despite recent downward revisions.
“Street FY26 estimates on both the top and bottom line appear optimistic, even after a sizeable reduction following earnings in mid-March,” the UBS team wrote.
UBS forecasts a 0.2% decline in organic sales growth for fiscal 2026, falling short of the company’s target of 2% to 3%.
The weaker outlook stems largely from continued market share losses, particularly in the North America Retail segment, which the firm sees outweighing gains in broader food categories.
While General Mills has pointed to innovation and affordability as ways to regain momentum, UBS cautioned that results may take time to materialize. “The changes will likely take time to bear fruit, especially in a challenging operating/consumer backdrop,” analysts wrote.
UBS also warned that profitability is likely to come under pressure next year, driven by higher investment, a reset in incentive compensation, and the fallout from the company’s yogurt business divestitures. These headwinds, the firm said, will likely outweigh the benefits of productivity savings and a favorable cost environment.
Analysts project earnings per share of $3.89 in FY26 and $4.11 in FY27, which are 3% and 2% below consensus estimates, respectively. The firm remains skeptical of the company’s ability to achieve high-single-digit earnings growth without a meaningful acceleration in sales, calling it “aspirational” unless top line growth accelerates.
Valuation also plays a role in UBS’s cautious stance. The $54 price target is based on a blended approach of price-to-earnings and EV/EBITDA multiples, with the analysts assigning a discount to peers due to General Mills’ slower growth profile. “With shares trading broadly in-line with recent historical averages, we do not believe this downside is priced in,” the analysts wrote.
Shares of General Mills fell around 2% on Wednesday morning in New York.