Why General Mills Stock Is Sinking After An Earnings Beat

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General Mills (GIS) is one of the worst S&P 500 stocks Wednesday after the Cheerios maker beat top- and bottom-line expectations for its fiscal 2025 second quarter but lowered its full-year profit forecast.

In the quarter ending November 24, General Mills' revenue increased 2% year over year to $5.2 billion. Its earnings per share (EPS) were up 12% from the year-ago period to $1.40.

The results topped analysts' expectations. Wall Street was anticipating revenue of $5.1 billion and earnings of $1.22 per share, according to S&P Global Market Intelligence.

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"We made important progress accelerating our volume growth and market share trends in the first half of the year, including returning our North America Pet business to growth," said General Mills CEO Jeff Harmening in a statement.

Harmening adds that in order to build on these gains, the company has had to boost its investments, which will weigh on GIS' profit outlook in fiscal 2025. However, this will "better position General Mills for sustainable growth in fiscal 2026 and beyond."

As a result of these increased investments, General Mills lowered its full-year profit forecast. The company now expects EPS to be down between 1% and 3% in the full fiscal year. This compares to its previous forecast of earnings per share growth between -1% to +1%.

"Amidst a dynamic external environment, I'm not only confident in our plans, but especially our teams, who are operating with agility and doing what's right for our consumers," Harmening said.

Is General Mills stock a buy, sell or hold?

General Mills has struggled on the price charts in 2024, up 5% on a total return basis (price change plus dividends) for the year to date vs the S&P 500's nearly 29% total return. Unsurprisingly, Wall Street is on the sidelines when it comes to the consumer staples stock.

According to S&P Global Market Intelligence, the average analyst target price for GIS stock is $73.91, representing implied upside of more than 15% to current levels. Meanwhile, the consensus recommendation is Hold.

Financial services firm Jefferies is one of those with a Hold rating on the large-cap stock and a $67 price target.

"GIS continues to invest for growth but has experienced volume pressure in most of its top categories, including those that performed well during the pandemic," wrote Jefferies analyst Rob Dickerson in a November 21 note. “The Pet segment remains challenged on the top line, given specialty pet channel issues." What's more, he said "the company is at medium-high risk of missing long-term organic growth algo over next three years."

Dickerson added that Jefferies sees "increased M&A probability" by General Mills to "improve" its growth profile.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.