General Mills vs. Kraft Heinz: Bite the Dip in these Popular Food Stocks?

Consumer food stocks are receiving a nice bump, as General Mills GIS was able to exceed expectations for its fiscal first quarter on Wednesday, ahead of the Federal Reserve’s decision to cut interest rates for the first time this year.

Like Kraft Heinz KHC, General Mills has been vulnerable to a shift in consumer shopping behavior as inflation has pushed shoppers toward cheaper private-label brands. That said, Kraft most recently exceeded its quarterly expectations as well in late July, thanks to strategic investments in emerging markets and better cost control.

Considering lower rates could re-shift consumers back to the premium branded food categories, investors may wonder if now is a good time to bite on the dip in General Mills and Kraft stock.

Spiking over +1% in Thursday’s trading session, respectively, GIS and KHC shares are still dwelling near their 52-week lows and have vastly lagged the broader market in recent years.  

General Mills Q1 Review

Posting Q1 sales of $4.51 billion, General Mills’ top line fell from $4.84 billion in the comparative quarter, although this topped estimates of $4.49 billion. On the bottom line, Q1 EPS came in at $0.86, dropping from $1.07 per share a year ago but exceeding expectations of $0.81.

General Mills attributed the stronger-than-expected results to investments that brought consumers more value in targeted business brands like Pillsbury, Totino’s, and its Fruit Snacks segment. Looking forward, General Mills said it plans to drive further improvement through continued execution of its price investments, new advertising campaigns, stronger in-store events, and innovation in its fresh pet food brand Blue Buffalo.

Notably, General Mills chairman and CEO Jeff Harmening stated that the most important task the company has in its current fiscal 2026 is to restore volume-driven organic sales growth.

Tracking General Mills & Kraft’s Outlook

With General Mills reconfirming its guidance, it’s noteworthy that Zacks' projections currently call for its total sales to dip 4% in FY26 to $18.65 billion compared to $19.49 billion in FY25. Fiscal 2027 sales are projected to slightly decrease to $18.59 billion.

General Mills' annual earnings are expected to fall 13% in FY26 to $3.65 per share from EPS of $4.21 in FY25. That said, FY27 EPS is projected to stabilize and rebound 4% to $3.81. Unfortunately, these EPS estimates have trended noticeably lower over the last 90 days for FY26 and FY27.

As for Kraft, its FY25 sales are now slated to dip 2% to $25.24 billion from $25.85 billion last year. However, FY26 sales are projected to stabilize and rebound 1% to $25.45 billion. Kraft’s earnings are forecasted to fall 15% this year to $2.58 per share, although FY26 EPS is projected to rebound 2% to $2.64. Optimistically, FY25 EPS revisions are slightly up for Kraft in the last 60 days, but FY26 estimates are modestly lower.  

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GIS & KHC Valuation Comparison

Trading under $30 a share, Kraft’s stock may be standing out to value investors at 9X forward earnings, with General Mills shares at around $50 and 13X. Despite their lackluster stock performances, both are at steep discounts to the benchmark S&P 500’s 25.4X forward earnings multiple and trade slightly beneath their Zacks Food-Miscellaneous Industry average of 15.5X.

GIS and KHC are also trading at discounts to their decade-long medians of 16.5X and 13.6X forward earnings, respectively. Furthermore, both trade at the preferred level of less than 2X forward sales, which is roughly on par with the industry average and below the S&P 500’s average of 5.6X.

GIS & KHC Dividend Comparison

What may be peaking investor interest in Kraft’s stock is that at current levels, its annual dividend yield is over 6%, topping General Mills’ 4.96%. Still, both have yields that are well above the S&P 500’s 1.11% average, and many miscellaneous consumer food stocks don’t offer a payout.

Conclusion & Final Thoughts  

While the stigma of being a value trap has certainly followed Kraft Heinz stock in recent years, KHC is making a stronger case for being undervalued and offering more upside to long-term investors with a Zacks Rank #3 (Hold) at the moment.

In contrast, the trend of declining earnings estimate revisions does potentially point to more downside risk ahead for General Mills stock. For now, GIS lands a Zacks Rank #4 (Sell), but hopefully its favorable Q1 report will start to improve analysts' outlook for the stock.

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This article originally published on Zacks Investment Research (zacks.com).

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