Is General Mills Worth an Investment as a Value Play?

When it comes to food giants, General Mills (NYSE: GIS) is at the top of the list. The company owns more products in the grocery store than most people realize. But even with a vast portfolio of popular brands, the company is at a turning point.

Sales are down as is the stock price. The company needs to make major changes in order to stop losing market share to up and coming brands, while at the same time, fend off potential takeover rumors.

How does General Mills move forward? With the stock price in the dumps, is this stock a good value play for an investor looking to make money?

Let’s find out.

The History Of General Mills

You can trace the origins of the company all the way back to the Civil War. That is when Cadwallader Washburn built a mill in Minnesota and started producing what would become Gold Medal flour.

Over the years, the company introduced new products into the mix and currently has 7 brands that each generate more than $1 billion in annual retail sales.

  • Betty Crocker
  • Cheerios
  • Nature Valley
  • Haagen-Dazs
  • Pillsbury
  • Yoplait
  • Old El Paso

The company even ventured outside of the packaged goods arena and started Olive Garden restaurants and Play-Doh.

The company has since moved on from the above two outliers and now focuses solely on packaged goods.

General Mills By The Numbers

In March, General Mills reported third quarter earnings and they beat estimates for earnings per share by $0.01 at $0.72. However, revenues missed the target by $30 million, coming in at $3.79 billion.

This only tells half the story however. Since 2014, revenues for the company have fallen a total of $2 billion. They are no longer the leader in the fast growing yogurt industry. And the cereal business, a staple for the company, has not been growing revenues at all for years.

Add this all together and you can see why the stock price is suffering.

Without any concrete plans for the future, the future for this industry giant is uncertain. Could they be bought out? Is there a way to revive the brands which led the company to prosperity?

Is General Mills A Buy

General Mills is in a tough spot. It is eerily similar to the one Proctor and Gamble is working through. The company needs to reinvent itself from changing consumer tastes.

Today’s consumers want fresh, healthy foods with ingredients they can pronounce. This is hard when pre-packaging foods.

But incoming CEO Jeff Harmening sounds like he understands the issues. In fact, he is hinting at a revolutionary yogurt product that General Mills will be debuting this summer.

But to make this stock worth your money to invest, the company needs to do more than introduce a new yogurt product.

They have to sell some of the brands so they can become more efficient. They have to take steps to show that pre-packaged foods can be healthy and affordable.

At the same time, the company has to fend off private equity firms who are looking at General Mills and the potential of buying them out if the stock price continues to fall.

This is what puts General Mills behind the eight ball. They have to cut costs and improve profit margins, but at the same time increase earnings so their stock price rises.

At this time, there are too many issues going on with General Mills to invest in. If you really want to take a chance, now is a good time to invest. But for most investors, you are better off waiting until some of the dust settles and we get a clearer picture of the direction General Mills plans to go.

This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.