Cheerios maker General Mills has a tasty recipe for earnings upgrades

The cereals champion has scope for upside and offers a play on pet ownership

Investors seeking a resilient total return stock with forecast upgrade potential should open a position in General Mills (GIS:NYSE), the Minneapolis-based food multinational with positive momentum across its diversified business.

The $47.8 billion cap recently raised guidance (21 February) for the year to May 2023, citing resilient consumer demand and the growth opportunities across its brand portfolio.

Originally a major flour miller, today’s General Mills is a food giant with more than 100 brands sold globally, which reinvests its reliable cash flows behind its brands whilst returning cash to shareholders through dividends and buybacks.

The company makes and markets breakfast cereals Cheerios and Lucky Charms in a partnership with Nestle (NESN:SWX) as well as meals, snacks, ice creams and baking mixes. This includes household name brands including Nature Valley granola bars, Yoplait yoghurt and Haagen-Dazs ice cream as well as Old El Paso sauces, Gold Medal Flour and Wanchai Ferry wontons and dumplings.

Such a portfolio suggests General Mills is well placed to profit from the cost-of-living squeeze, which has led to increased at-home eating as cashstrapped consumers look to save money.

Guided by CEO Jeffrey Harmening, General Mills is cooking up profitable growth through its ‘Accelerate’ strategy with a focus on two businesses: North America Retail, its largest business in its largest core market and Pet Food, the fastest-growing part of General Mills, with much excitement surrounding the potential of the Blue Buffalo dog and cat food brand.

According to the company, Blue Buffalo is ‘well positioned for long-term continued growth as a leader in the humanisation of pet feeding and treating’. General Mills will soon test a new Fresh line of refrigerated Blue Buffalo dog food and is also investing in the expansion of Blue Buffalo Tastefuls, a new line of wet cat food crafted to entice even the pickiest of felines.

General Mills also plans to expand Blue

GENERAL MILLS (GIS:NYSE)

Price: $80.98

Market cap: $47.8 billion

Buffalo products in China and begin testing the brand in other international markets in its 2024 financial year.

While the shares aren’t cheap on a 12-month forecast rolling price-to-earnings ratio of 18.7 with a 2.8% dividend yield, General Mills has pedigree in offsetting inflation through cost savings and price increases and has the capacity to serve up upgrades.

The company recently raised full year 2023 organic sales growth guidance to around 10% and its adjusted earnings per share (EPS) growth estimate to between 7% to 8%. Management is confident the consistent execution of its Accelerate strategy leaves the firm ‘well-positioned to continue driving profitable growth and toptier returns for its shareholders in the years to come’. [JC]