Rising wages and a supply chain crunch should take a bite out of General Mills ' earnings power, according to Credit Suisse. Analyst Robert Moskow downgraded General Mills to neutral from outperforming. "Management raised to the high end of its profit and EPS range 'mostly' to account for the recent acquisition of pet treats brands. However, they also said that they will need to take additional pricing and cost efficiency actions to mitigate higher costs on the core business from unexpected labor shortages at suppliers and distributors," he said in a note to clients Monday. "Our sense is that this will lead to another pricing lag and more margin compression in the back half of FY 22 when the company's hedges roll over and the full impact of the inflation flows through." Credit Suisse lowered its price target on the stock by $5 to $63 per share. That target is less than 8% above where the stock closed on Friday. To be sure, Credit Suisse said General Mills has proven adept at raising prices in the past, which could help it offset these cost pressures. General Mills' stock has been mostly flat this year, dramatically underperforming the broader market. The company is scheduled to report its fiscal first quarter earnings on Sept. 22. -CNBC's Michael Bloom contributed to this report.
General Mills' Cheerios for sale on a store shelf.
Lisa Baertlein | Reuters
Rising wages and a supply chain crunch should take a bite out of General Mills' earnings power, according to Credit Suisse.