Go-Power At General Mills

Things Got Soggy Fast
Faced with a raft of woes -- including a possible accounting probe -- General Mills (GIS ) has seen shares slide from nearly 50 in June to 44, as many investors fled. But some pros -- confident the Securities & Exchange Commission's request for info on sales accounting will have no dire results -- have bought at the low price. General Mills, maker of Cheerios and Betty Crocker cake mixes, "is irresistibly cheap for a blue chip," says John Maloney of M&R Capital Management, which has bought shares. The worries, he adds, "will undoubtedly be resolved." He sees the stock at 55 to 60 in a year. John McMillan of Prudential (PRU ) Equity Group is also unfazed by the SEC. "It isn't likely to have bottom-line impact," he says. Other concerns: a grocers' strike in California, which could dent sales, and a worry that Diageo might sell its 20% stake in Mills. (Diageo sold Pillsbury to Mills in 2001). The strike won't last, says Maloney. And McMillan notes it's unlikely that Diageo (DEO ) will sell at current prices. Diageo won't say when it will. McMillan rates the stock "outperform" and sees earnings of $3.02 a share in fiscal 2004, ending May 31, and $3.35 in 2005, vs. 2003's $2.65.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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