General Mills Inc.
) reaffirmed its sales and earnings guidance for fiscal 2013. The
company continues to expect adjusted diluted earnings per share of
about $2.65 for fiscal 2013, a penny lower than the Zacks Consensus
estimate of $2.66.
Earnings are expected to decline year over year in the first
quarter of fiscal 2013, and then grow in the remaining nine months.
The Zacks Consensus Estimate for the first quarter is 62 cents,
down a couple of cents from the 64 cents reported in the year-ago
quarter and down 6 cents since the company reported its fiscal
fourth quarter results.
General Mills had a good fourth quarter, with earnings of 60 cents
per share beating the Zacks Consensus Estimate by 3.4%. Earnings
also topped the year-ago results by 15% driven by good 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, which were acquired in July last year.
The company expects to post mid-single digit growth in net sales in
fiscal 2013 due to the recent acquisitions of Yoplait
International, Parampara in India and Food Should Taste Good in the
Gross margins are expected to improve modestly from 2012 levels.
Operating profits are expected to grow slightly faster than sales
in a mid-single digit range as cost savings and mix management
offset commodity cost inflation.
In order to drive sales growth, General Mills is looking to expand
in five global categories, namely ready-to-eat cereals,
super-premium ice cream, convenient meals, wholesome snack bars and
yogurt. The company particularly intends to focus on its
Haagen-Dazs and Yogurt businesses in Europe and plans to launch
about 70 new products in the first half of fiscal 2013, with 35 new
items in the U.S. yogurt category alone.
Through innovation of new and established brands, the company wants
to cater to the increasing global demand for packaged food. Some of
these innovations add more nutritional value to the packaged food
with more fruits, vegetables and fiber and less fat content. The
idea is to appeal to the growing number of health conscious
customers who prefer the convenience of healthy packaged food.
The company intends to expand in the emerging markets of China,
Brazil, India, and Russia, since the U.S. market is mostly
saturated and offers limited growth opportunity. The number of
middle class consumers with positive consumer spending is growing
in these emerging markets and a majority of them are shifting to an
urban lifestyle. As a result, the demand for convenient and branded
packaged food is on the rise, presenting good growth opportunity
for the company.
We appreciate the company's outstanding portfolio of growth
products and brands, especially its healthy and convenience
packages. We also like the company's commitment towards a steady
pipeline of new products in an effort to boost its sales momentum
and expand its market beyond the U.S.
However, we prefer to remain on the sidelines until 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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General Mills Inc. carries a Zacks #3 Rank in the near term (Hold
rating). We currently have a Neutral recommendation for the long
term (3-6 months).