We have a Neutral recommendation on
General Mills Inc.
) following appraisal of first quarter fiscal 2013 results.
General Mills' first quarter fiscal 2013 adjusted earnings
rose 3.1% year on year to 66 cents per share. The quarterly
earnings also beat the Zacks Consensus Estimate of 62 cents and
were better than management's expectations that earnings would
drop from the year-ago levels. The upside was driven by recent
Total revenue of the global consumer food company increased 5%
year over year to $4.05 billion. Revenues mostly benefited from
the addition of Yoplait International in July 2011, Parampara
Foods in India, Food Should Taste Good in the United States and
Yoplait Ireland in the final quarter of fiscal 2012. The company
maintained its full year earnings outlook.
Read our full report at
Mixed Results for General Mills.
General Mills has an outstanding portfolio of growth products
and brands, especially its healthy and convenience packages. Its
popular brands include Big G cereals, Betty Crocker, Pillsbury,
Progresso, Hamburger Helper, Yoplait, and Old El Paso. The
company's core brands ranks either the first or second position
in some fast growing food categories. The company continues with
its efforts to improve its brands in order to build brand equity
through strong consumer marketing.
Further, General Mills remains committed toward introducing a
steady pipeline of new products in an effort to boost its sales
momentum and capture market share. Particularly, in order to
drive sales growth, General Mills is looking forward to expand
and diversify into five global categories, which account for over
60% of the worldwide sales and deliver foods that are convenient,
nutritious and provide good taste at a good value. These
categories include ready-to-eat cereal, super-premium ice cream,
convenient meals, wholesome snack bars and yogurt. All of these
have promising growth potential.
General Mills is dedicated toward expanding its presence
outside the U.S. due to low disposable income of consumers and
near saturation in the U.S. market. The company is increasing
focus on expansion in the emerging markets of China, Brazil,
India, and Russia, where the consumer spending growth is
positive. In order to tap these fast growing markets, consumer
companies are looking to introduce new capabilities and product
lines. General Mills also invests in new businesses through
complementary acquisitions that build on its marketing
Further, General Mills' Holistic Margin Management (HMM)
program has successfully managed costs and abated inflation, thus
improving the company's margins and gaining over its peers. The
program has already delivered its three-year goal of $1 billion
in cost savings that was announced in 2010. Moreover, the program
is expected to generate additional productivity savings of $3
billion by the year 2020.
We believe the company's strong brand marketing, continuous
innovation, expansion in emerging markets and productivity
savings will help it to achieve long-term goals. However, we
prefer to remain on the sidelines until the U.S. retail volumes
improve, the Yoplait yogurt business delivers encouraging returns
and the macroeconomic environment recovers substantially. The
company competes with
ConAgra Foods, Inc.
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