General Mills Retains 2013 Guidance - Analyst Blog

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General Mills Inc. ( GIS ) 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 United States.

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.

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).


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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