On Feb 5, we maintained a Neutral recommendation on global
consumer food company
General Mills Inc.
) following appraisal of its second quarter fiscal 2013 results.
The company also carries a Zacks Rank #3 (Hold).
Why the Neutral Recommendation?
General Mills' second quarter fiscal 2013 adjusted earnings
rose 13% year on year to 86 cents per share. The quarterly
earnings handsomely beat the Zacks Consensus Estimate by almost
9%. The upside was driven by recent acquisitions,
better-than-expected sales and profits in the U.S. retail
business and lower interest expenses and taxes. The company also
delivered solid revenue growth and upped its full year earnings
Overall, we are encouraged by the company's strong market
share position in some leading food categories, its growing
international presence, strategic acquisitions and focus on
innovation and brand support. These initiatives combined with the
cost saving efforts bode well for the company's long-term
The U.S yogurt business remains challenging as increased sale
prices in response to dairy cost inflation is reducing the
competitiveness of its products. Though management is taking
steps to re-invigorate this business through innovation and
increased promotional support for new products, we prefer to wait
until there is a substantial rebound. Moreover, volume growth of
the overall U.S. retail business has remained sluggish since the
past few quarters, though some improvement was seen in the second
quarter of fiscal 2013. The core cereal business has not
delivered impressive results in the last few quarters as
We would like to remain on the sidelines until we see
substantial improvement in the U.S. retail business, especially
the yogurt segment.
Other Stocks to Consider
Some other large food stocks worth a look are
ConAgra Foods, Inc.
H. J. Heinz Company
). All of these are Zacks Rank #2 (Buy) stocks.
CONAGRA FOODS (CAG): Free Stock Analysis
GENL MILLS (GIS): Free Stock Analysis Report
HEINZ (HJ) CO (HNZ): Free Stock Analysis
KELLOGG CO (K): Free Stock Analysis Report
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