We have a Neutral recommendation on
General Mills Inc.
) following appraisal of fourth quarter fiscal 2012 results.
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 a significant rise in input
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.
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
Read our full report at
General Mills EPS Beats, Sales Miss
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 hold the number one or two share positions in
some fast-growing food categories.
Further, General Mills remains committed towards 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 into five
global categories, which account for over 60% of worldwide sales:
ready-to-eat cereal, super-premium ice cream, convenient meals,
wholesome snack bars and yogurt.
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.
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
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,
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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