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GIS – Market expectations are for Uniform ROA to contract, but management may be concerned about pricing, demand, and plant-based products

July 28, 2021

  • General Mills, Inc. (GIS:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 21.7x Uniform P/E. At these levels, the market is pricing in expectations for profitability to contract, but management may be concerned about the volatility of pricing, sustainability of demand, and launches of new plant-based products.
  • Specifically, management may have concerns about the centralization of their corporate functions, the performance of less popular categories post-pandemic, and the potential of their Yoplait plant-based product launch. Furthermore, they may lack confidence in their ability to further develop the plant-based segment of their yogurt business, leverage first-party data insights across digital channels, and enhance their data and analytics capabilities. Finally, management may be concerned about the sustainability of demand and volatility around pricing, and they may be exaggerating the strength of their relationship with retail clients.