General Mills initiated with an Underweight at Morgan Stanley

Morgan Stanley initiated coverage of General Mills with an Underweight rating and $53 price target The firm launched coverage of the U.S. packaged food industry with an In-Line view. Earnings visibility is low with sales growth expected to “remain muted” given ongoing secular consumption headwinds and constrained pricing power while accelerating commodity inflation and continued need for reinvestment limits margin expansion potential, the analyst tells investors in a research note. Morgan Stanley’s base case assumes a more stable backdrop for food consumption and a continuation of secular headwinds, resulting in a “widening dispersion of fundamental performance. The firm favors “advantaged categories, demonstrated pricing power, and thriving brands,” while being cautious names that face slower growth and higher reinvestment risk. Its Top Pick is BellRing Brands (BRBR), as the firm believes the recent pullback creatives a compelling entry point for a “scarce growth asset.” Morgan expects General Mills’ (GIS) “disadvantaged: North America retail exposure and persistent pet challenges will limit its sales momentum and continue to weigh on sentiment.