- The Washington Times - Thursday, March 19, 2009

MILWAUKEE (AP) - Analysts lowered their price targets for General Mills Inc. on Thursday but said they still back the food maker, which has reported that high costs pushed down its third-quarter profit even though sales rose.

BMO Capital Markets analyst Kenneth Zaslow lowered his price target from $78 to $63 a share and told clients in a note that the company was “wounded but still standing strong.”

The company’s shares fell 11 percent on Wednesday to a new three-year low after it announced its results for the third quarter, when profit fell 33 percent.

On Thursday, the shares fell 34 cents to end at $47.29. Earlier in the session, the stock traded at $46.37, its lowest point since September 2005.

Zaslow said the stock’s drop probably was temporary, like dips during 2007, when shares fell 10 percent on concerns about the company changing the sizes of some of its packages and during the following winter, when the stock fell 12 percent.

He said the company, known for brands like Cheerios, Pillsbury and Gold Medal flour, is seeing sales rise, and its market share is growing. Consumers are eating more at home as they look to save money.

The Golden Valley, Minn.-based company’s stock “deserves a premium valuation to its peers,” he wrote, saying it will outperform competitors.

“General Mills is our favorite _ and only _ idea in the U.S. packaged-food industry,” he wrote.

UBS analyst David Palmer lowered his target share price from $70 to $64 and said the dip in shares on Wednesday resulted from an overreaction to several concerns, including currency fluctuation. When the U.S. dollar gains strength, that weighs on businesses with interests overseas.

In the quarter ending in February, the stronger dollar reduced revenue growth by 3 percentage points. Overall, sales rose 4 percent in the quarter to $3.54 billion.

Palmer wrote to clients that the company says it still can deliver earnings per share growth in the high single digits, even with the currency woes.

Both analysts raised their estimates for fourth quarter performance, as the company said it expected high ingredient costs to moderate in the quarter, which ends in May.

Zaslow raised his guidance from 74 cents a share to 78 cents, while Palmer raised his from 71 cents a share to 78 cents.

Analysts on average predict the company earns 74 cents a share, according to Thomson Reuters. Their estimates typically exclude one-time items.

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