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Possible buyout by Kraft Heinz?  

JPMorgan analyst Ken Goldman downgraded Kellogg (K) to Neutral from Overweight and lowered his price target for the shares to $66 from $73. The analyst also removed the stock from his firm's Analyst Focus List. He says that while nothing at the company's investor day "necessarily disappointed" him, he also did not gain "much comfort that the bottom-line turnaround would be swift." Maintaining an Overweight rating in the face of flat EBIT growth in both 2018 and 2019 "requires a bit more patience than we have at the moment," Goldman writes in a note to investors. With that said, the analyst did raise the likelihood that Kellogg gets taken out at a 25% premium to 15% from 5% in his scenario analysis. This is not because of anything specific to Kellogg, but rather because Kraft Heinz (KHC) seems close to buying something in consumer staples, says the analyst. Goldman sees a number of companies are potential targets, including General Mills (GIS), Kellogg, an overseas food producer, or a consumer staples company outside food.

Earlier in the year their third quarter fiscal year results were a bit off due to higher transportation costs and their acquistion of the Blue Buffalo brand for 8 billion which is about 25 x EBITDA

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3 hours ago, Goat Geddah said:

What’s up with General Mills Stock?   

 

General Mills has been losing market share to greener food makers as comsumer preferences have shifted from processed breakfast cereals toward less-processed stuff and toward Greek Yogurt that General Mills' Yoplait has not kept up with.  In general, virtually all the the traditional packaged food companies are also losing sales: Kelloggs, Con-Agra, etc.

GIS;s earnings per share, 2015-2020 (the last two with very likely estimations) illustrate the how GIS dipped and is in the process of recovery:  $1.97, $2.77, $2.77, $3.64, E$3.03, E$3.24. Notice the expectation it's going to make good profits. Note that earnings are estimated to grow 8% in 2020. Additionally the stable dividend of 4.9% (which eats up a sustainable 54% of earnings and has been raised 13 of the last 15 years), and the current very low (cheap!) P/E ratio of 10.2 (the S&P 500 avg. is 21.7) makes it very attractive as a turnaround that was never really in trouble.

The 21 major analysts tracked by Yahoo have short-term ratings of: 1 strong buy, 1 buy, 15 hold, 3 underperform, 1 sell.

One reason I hold it is it's long term stability.  When the market collapsed by 45% between Sep. '08 and Mar. '09 GIS also fell, by 33%. But just 9 months later, on 12/21/09, GIS stock hit a new all-time high: even in recessions people keep buying Cheerios, Betty Crocker, etc.

GIS's trouble have been growing but came to a head only this year. My personal returns (stock price plus dividend) for 2014-2018 have been continually getting smaller but positive every year except 2018: 12.1%, 11.4%, 10.3%, 1.2%, -27.1%.

It's 4.4% of my stock portfolio, I've owned it for several years, and I'm not in a hurry to sell it because General Mills has a durable competitive advantage in some brand names like Cheerios, Betty Crocker, Pillsbury, and Gold Medal flour.  It has branched out into more "green" stuff like Annie's soups, pasta, etc. which it bought for $800M. In the last few years to make itself more nimble in adjusting to changing consumer choices, it sold it's Green Giant and Le Sueur veggies and its frozen foods - allegedly sales of canned and frozen foods is going downhill.  It has also branched out and bought Blue Buffalo Pet Foods, which is expected to add $1.3 billion in sales to GIS's existing $15.7 billion.

General Mills is a big company that has advantages of size and should provide a good return with a good dividend in the future.

I don't expect average gains of more than 10% per year, but that's ok for me.

 

 

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