UBS Keeps Sell on General Mills Ahead of Q1 Results

UBS cut its fiscal 2027 adjusted earnings per share estimate for General Mills to $3.01 from $3.03, below the Street's $3.08, and reiterated its 'Sell' rating on the shares days before the company reports first-quarter results on Wednesday.

The bank forecasts adjusted EPS of $0.72 for the quarter, in line with consensus estimates. It adjusted its assumptions to reflect improved consumption trends in the first quarter but higher cost pressures in fiscal 2027.

The warning lands at an awkward moment for the packaged food maker. General Mills said last week that inflation was running toward the higher end of its previous guidance range. The company has guided for organic sales to range between a decline of 1.5% and growth of 0.5%.

Still, UBS does not expect the earnings report itself to be a negative catalyst. The bank pointed to the recent share price pullback as a buffer. General Mills shares have underperformed this month despite management reiterating its full-year guidance last week.

The pressure extends across the sector. UBS noted that the packaged food subsector had fallen 4.4% month to date after being the best-performing consumer staples subsector in recent months. The bank attributed the shift to concerns over volatile input costs alongside weak consumption trends across the industry.

For continued outperformance, UBS said a return to sales growth was likely needed. The bank viewed a return to growth as unlikely at this stage.

UBS expects General Mills to maintain its fiscal 2027 adjusted earnings guidance of $3 to $3.20 per share with its first-quarter results.

The company's own planning assumptions frame the year ahead. General Mills expects interest expense of $580 million, an adjusted tax rate of 20% and average share count to remain roughly flat year over year.

Investors will find out on Wednesday whether the cost pressure General Mills flagged last week forces management off that guidance, or whether consumption trends improved enough in the quarter to support the low end of the outlook.