General Mills Inc.
) is all set to report its first quarter 2013 results before the
start of trading on September 19, 2012. The Zacks Consensus
Estimate for the fourth quarter is 62 cents (estimated
year-over-year decline of 3.1%) on revenues of $4.07 billion
(year-over-year increase of 5.8%).
Fourth Quarter 2012 Recap
General Mills' fourth-quarter 2012 earnings of 60 cents per
share beat the Zacks Consensus Estimate by 3.4%. Earnings also
topped the year-ago results by 15% driven by positive top-line
growth and cost savings despite significant rise in input cost.
Total revenue of the global consumer food company increased 12%
year over year to $4.07 billion, benefiting mainly from the
addition of Yoplait entities that were acquired in July last year.
Revenues marginally missed the Zacks Consensus Estimate of $4.12
However, the addition of Yoplait International to the business
mix, higher input cost inflation and lower U.S. retail volumes
dragged the quarter's adjusted gross margin down by 140 basis
points (bps) to 37.2%. Adjusted operating margin still expanded 40
bps to 16.2% in the quarter due to the company's cost saving
Agreement of Estimate Revisions
Over the last 7 days, 1 of 14 estimates has moved down for the
first quarter of fiscal 2013. However, over the last 30 days, 2
estimates have moved down for the quarter. None of the estimates
has been revised upwards. There has been no estimate revision for
fiscal 2013 either over the last 7 or 30 days.
Management had already guided that earnings would decline year
over year in the first quarter of fiscal 2013 and grow subsequently
in the remaining nine months. The food industry is currently
suffering from rising input costs and issues related to volume
growth, which are offsetting the benefits from increased pricing.
Though the analysts expect top-line growth to remain healthy,
rising costs could undo most of the gains, imposing pressure on
Magnitude of Estimate Revisions
Given the limited estimate revisions, the consensus estimates
for the first quarter as well as for fiscal 2013 have remained
static over the last 7 days at 62 cents and $2.65, respectively.
However, over the last 30 days, the estimates have gone down by a
penny for the first quarter from 63 cents to 62 cents and for
fiscal 2013 from $2.66 to $2.65.
General Mills has surpassed earnings estimates in two of the
last four quarters and missed twice. It recorded a maximum positive
surprise of 3.45% in the fourth quarter of fiscal 2012. On an
average, the earnings surprise was 0.27% in the trailing four
We currently have a Neutral recommendation on General Mills. The
stock carries a Zacks #3 Rank (a short-term 'Hold' rating).
We are encouraged by the company's strong market share position
in some fast growing food categories, its growing international
presence, strategic acquisitions and focus on innovation and brand
support. These growth initiatives combined with the cost saving
efforts bode well for the company's long-term growth. However, we
prefer to remain on the sidelines until the U.S. retail volumes
improve, margin pressures (due to input cost headwinds) subside,
and the macroeconomic environment recovers substantially.
GENL MILLS (GIS): Free Stock Analysis Report
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