Market Capitalization $31.9 Billion

Transcription

1 BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUY BUY RATING SINCE 12/14/2010 TARGET PRICE $64.83 BUSINESS DESCRIPTION General Mills, Inc. manufactures and markets branded consumer foods in the United States. The company operates in four segments: North America Retail; Convenience Stores & Foodservice; Europe & Australia; and Asia & Latin America. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues Net Income EPS Sector: Consumer Non-Discretionary Sub-Industry: Packaged Foods & Meats Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY TARGET PRICE $ RETURN ON EQUITY (%) Ind Avg S&P 500 Q Q Q P/E COMPARISON Volume in Millions COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History RECOMMENDATION We rate () a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations, growth in earnings per share and expanding profit margins. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated EPS ANALYSIS¹ ($) Ind Avg S&P 500 HIGHLIGHTS Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Food Products industry and the overall market, 's return on equity significantly exceeds that of both the industry average and the S&P 500. Net operating cash flow has significantly increased by % to $ million when compared to the same quarter last year. In addition, has also vastly surpassed the industry average cash flow growth rate of %. Q Q Q Q Q Q Q Q Q 's earnings per share improvement from the most recent quarter was slightly positive. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, 's EPS of $2.77 remained unchanged from the prior years' EPS of $2.77. This year, the market expects an improvement in earnings ($3.09 versus $2.77). NA = not available NM = not meaningful 1 Compustat fiscal year convention is used for all fundamental data items. Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.6%. Since the same quarter one year prior, revenues slightly dropped by 3.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share % is the gross profit margin for which we consider to be. Regardless of 's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, 's net profit margin of 10.73% compares favorably to the industry average. PAGE 1

2 PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -10% 5% TSN UNFAVORABLE 10% HRL EBITDA Margin (TTM) K MKC.V CAG FAVORABLE HSY CPB SJM MDLZ KHC 32.5% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $13.1 Billion and $96.2 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -10% 5% UNFAVORABLE 2.5% HSY K KHC MDLZ Earnings Yield (TTM) MKC.V CAG SJM HRL FAVORABLE TSN CPB Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -9.1% and 4.2%. Companies with NA or NM values do not appear. 6% INDUSTRY ANALYSIS The US food products industry is dominated by a few multinational corporations like Mondelez International (MDLZ), General Mills (), and Kellogg (K). The entire industry, from growing to processing, is extremely competitive and margins are typically so low that earning profit becomes a challenge. The worldwide processed food industry is facing low growth rates, high energy costs and continuously changing consumer preferences. Nonetheless, there are a few high growth segments, like health, frozen, and organic food. Globalization has led to the rise of massive multinational food processing companies, which sell their products under local names in local languages after producing them in regional factories. Taste, convenience and health continue to be the primary drivers of food choices. Growing popularity of ethnic food, including Greek, Latin, Asian, Korean, Cuban, and Japanese foods, is expected to drive demand. Increasing health concerns are impacting all sectors within the industry as obesity levels continue to rise to alarming rates. Various branches of the US government, including the Food and Drug Administration (FDA), along with a host of consumer groups are squaring off with food producers over nutrition and the responsibilities and ethical issues inherent in the production and marketing of food. The treatment of agricultural animals is rapidly gaining consumer awareness and has forced a realignment of research methods. The industry is being squeezed from all sides. Prices for milk, eggs, corn, wheat, oils and almost all other edible commodities continue to surge. The prices of electricity and fuel are also increasing, making processing and distribution more expensive. With high international unemployment, modest inflation and slow economic growth, passing on the entire price hike to consumers is not an option with apprehensions of substantially reducing overall demand. Brand value is gaining prominence among producers as demand is declining. Factors contributing to the rise in prices include high feed prices caused by ethanol demand, less inventory with heifer calves being retained and a possible increase in demand for exports due to a depreciating dollar. Multinational companies with diversified customer bases are best positioned to overcome this high-price/low-demand trend. NestlÃ, the world's biggest food firm, and Kraft, one of America's biggest food firms, fit this description. We expect higher input costs to negatively impact margins, leading manufacturers to seek greater production and supply-chain efficiencies. Increased awareness and acceptance of rising food prices should lead to greater home-dining trends, stimulating brand building and niche market initiatives at major food processors. These issues, among others, will drive industry trends and M&A activity going forward. PEER GROUP: Food Products Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) , , , KHC KRAFT HEINZ CO , , , MDLZ MONDELEZ INTERNATIONAL INC , , , TSN TYSON FOODS INC , , , K KELLOGG CO , , HRL HORMEL FOODS CORP , , HSY HERSHEY CO , , CAG CONAGRA BRANDS INC , , CPB CAMPBELL SOUP CO , , SJM SMUCKER (JM) CO , , MKC.V MCCORMICK & CO INC , , The peer group comparison is based on Major Packaged Foods & Meats companies of comparable size. PAGE 2

3 Annual Dividend Rate COMPANY DESCRIPTION General Mills, Inc. manufactures and markets branded consumer foods in the United States. The company operates in four segments: North America Retail; Convenience Stores & Foodservice; Europe & Australia; and Asia & Latin America. It offers ready-to-eat cereals, refrigerated yogurt, soup, meal kits, refrigerated and frozen dough products, dessert and baking mixes, frozen pizza and pizza snacks, shelf stable and frozen vegetables, and ice cream and frozen desserts, as well as grain, fruit and savory snacks; and various organic products, including nutrition bars, meal kits, salty snacks, and ready-to-eat cereal. The company markets its products under the Annie's, Betty Crocker, Bisquick, Bugles, Cascadian Farm, Cheerios, Chex, Cinnamon Toast Crunch, Cocoa Puffs, Cookie Crisp, Fiber One, Food Should Taste Good, Fruit by the Foot, Fruit Gushers, Fruit Roll-Ups, Gardetto's, Go-Gurt, Gold Medal, Golden Grahams, Haagen-Dazs, Helpers, Jeno's, Jus-Rol, Kitano, Kix, La Saltena, Larabar, Latina, Liberte, Lucky Charms, Muir Glen, Nature Valley, Oatmeal Crisp, Old El Paso, Pillsbury, Progresso, Raisin Nut Bran, Total, Totino's, Trix, Wanchai Ferry, Wheaties, Yoki, and Yoplait names. It also supplies branded and unbranded food products to the foodservice and commercial baking industries. The company sells its products directly, as well as through broker and distribution arrangements to grocery stores, mass merchandisers, membership stores, natural food chains, e-commerce grocery providers, commercial and noncommercial foodservice distributors and operators, restaurants, and convenience stores, as well as drug, dollar, and discount chains. It operates 433 ice cream parlors; and franchises 356 branded ice cream parlors. General Mills, Inc. also exports its products primarily to Caribbean and Latin American markets. The company was founded in 1928 and is based in Minneapolis, Minnesota. Number One General Mills Boulevard Minneapolis, MN USA Phone: STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 3.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 50% of the stocks we rate. Total Return 1.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 20% of the companies we cover. Efficiency 5.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. Price volatility 2.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 40% of the stocks we monitor. Solvency 4.0 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 70% of the companies we analyze. Income 4.5 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 80% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3

4 Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.82 Q2 FY E 2018(E) 3.22 E 2019(E) INCOME STATEMENT Net Sales ($mil) 3, , EBITDA ($mil) EBIT ($mil) Net Income ($mil) FINANCIAL ANALYSIS 's gross profit margin for the first quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. Sales and net income have dropped, however the growth has outpaced the average competitor within the industry. has very liquidity. Currently, the Quick Ratio is 0.40 which clearly shows a lack of ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year. During the same period, stockholders' equity ("net worth") has decreased by 20.46% from the same quarter last year. The key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit BALANCE SHEET Cash & Equiv. ($mil) Total Assets ($mil) 22, , Total Debt ($mil) 10, , Equity ($mil) 3, , PROFITABILITY Gross Profit Margin 38.97% 40.86% EBITDA Margin 20.94% 22.63% Operating Margin 17.10% 18.73% Sales Turnover Return on Assets 7.44% 7.66% Return on Equity 42.34% 34.22% DEBT Current Ratio Debt/Capital Interest Expense Interest Coverage SHARE DATA Shares outstanding (mil) Div / share EPS Book value / share Institutional Own % NA NA Avg Daily Volume 4,044,176 3,945,376 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4

5 RATINGS HISTORY Our rating for has not changed since 11/12/2004. As of 12/14/2017, the stock was trading at a price of which is 12.4% below its 52-week high of $64.06 and 13.1% above its 52-week low of $ Year Chart BUY: $ $80 $70 $60 MOST RECENT RATINGS CHANGES Date Price Action From To 12/14/15 $58.43 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 12/14/2017) 44.62% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months % Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss % Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY Research Contact: Sales Contact: VALUATION BUY. This stock's P/E ratio indicates a discount compared to an average of for the Food Products industry and a discount compared to the S&P 500 average of For additional comparison, its price-to-book ratio of 8.17 indicates a significant premium versus the S&P 500 average of 3.24 and a significant premium versus the industry average of The price-to-sales ratio is below both the S&P 500 average and the industry average, indicating a discount. The valuation analysis reveals that, GENERAL MILLS INC seems to be trading at a discount to investment alternatives within the industry. Price/Earnings Peers Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. is trading at a significant discount to its peers. Price/Projected Earnings Peers Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations. is trading at a discount to its peers. Price/Book 8.17 Peers 4.67 Premium. A higher price-to-book ratio makes a stock less attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant premium to its peers. Price/Sales 2.06 Peers 2.15 Average. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a valuation on par with its industry on this measurement. DISCLAIMER: Price/CashFlow Peers Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a significant discount to its peers. Price to Earnings/Growth 1.74 Peers 2.79 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its peers. Earnings Growth lower higher 1.45 Peers Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher Peers 0.47 Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at PAGE 5