General Mills ($GIS) is a staple in the morning, serving up consumer favorite foods like Cheerios, Chex Mix, Trix, Cinnamon Toast Crunch, and the magically delicious Lucky Charms, along with fan favorites Haagen-Daz, Totinos, Hambuger Helper, and good old Green Giant vegetables.


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As of their last earnings call, General Mills did have some interesting points of note. One, they are experiencing growth in the niche yogurt market, YQ, a lower sugar and generally healthier yogurt to compete with the likes of Chobani, and Danone, helping to meeting consumer demands for healthier breakfast options.

The biggest watch though, is how the Blue Buffalo acquisition will play out. General Mills recently bought Blue Buffalo for $8 billion, in a mix of financing, debt, and cash on hand transaction. Dog food for a cereal maker? It makes sense. Blue Buffalo posted guidance (before it was bought out) of between $1.4 and $1.43 billion in estimated sales, with a diluted EPS growth of almost 50%. Consumers want this brand, and it’s clear that they will pay a premium for it.

A few challenges plague both General Mills and the industry as a whole, but they do have a few opportunities. Freight and shipping costs are going up, because, you guessed it, cereal is heavy and expensive to ship, probably only beat by shipping beverages and water (looking at you Nestle and Monster Energy). There are some growth opportunities. Shipping to consumers and helping accelerate retailers top line through direct to consumer sales through eCommerce are incredibly lucrative, and only help both General Mills and the retail partners.

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With the now integrated Blue Buffalo purchase, and using a 5 YR EBITDA analysis, we see a price target north of $70. Growth until 2022, and industry standard multiples of 13.3x, this stock can provide significant value to investors looking for a safer play, everyone needs to eat. General Mills shares are also semi-attractively priced, allowing beginner investors to get into a very stable company for roughly $40-$50 a share, as well as providing a 4% dividend yielding roughly $1.96 a share, giving value and fixed income investors stability as well.

Given the stability of $GIS through the years, and major acquisitions, plus a strong (and only growing brand portfolio), there is significant potential upside to this morning master.

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