General Mills Inc.
) is set to report third-quarter fiscal 2014 results on Mar 19,
before the market opens. Last quarter, it delivered a negative
earnings surprise of 5.68%. Let's see how things are shaping up
for this announcement.
Factors to Consider this Quarter
General Mills had a tough first half due to margin pressure
from higher input costs. Moreover, two of its most important
categories - cereals and yogurt - have been sluggish. However,
management expects earnings to accelerate in the second half due
to strong product launches, lower input cost inflation and easing
Management expects volumes to be better in the third quarter
than second gaining from the inclusion of Thanksgiving holiday
sales. Commodity cost inflation is expected to be lower in the
second half than in the first.
However, the softness seen in the U.S. food industry in the
second quarter is not expected to improve much in the second
half. Moreover, the currency headwinds are expected to persist in
the second half. Though earnings per share are expected to grow
in a double-digit range in the second half, growth is expected to
be stronger in the fourth quarter. Segment operating profit is
expected to grow in high single digits in the second half.
Another company that is under pressure due to its cereals
). Kellogg's mainstay U.S. cereal business, accounting for 40-45%
of sales, performed poorly in 2012 and 2013 due to sluggish
category growth. Lower demand for cereals due to competitive
pressures from alternatives including yogurt, eggs, bread, and
peanut butter is hurting category growth.
Our proven model does not conclusively show that General Mills
is likely to beat earnings this quarter. That is because a stock
needs to have both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here, as you will see below.
The Earnings ESP is -3.13%.
General Mills' Zacks Rank #3 (Hold) when combined with a negative
ESP lowers the predictive power of ESP.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks in the consumer staples sector that have both a
positive earnings ESP and a favorable Zacks Rank are:
Coca-Cola Enterprises, Inc.
), with Earnings ESP of +4.55% and a Zacks Rank #2 (Buy).
Dr Pepper Snapple Group, Inc.
), with Earnings ESP of +1.70% and a Zacks Rank #2.
COCA-COLA ENTRP (CCE): Free Stock Analysis
DR PEPPER SNAPL (DPS): Free Stock Analysis
GENL MILLS (GIS): Free Stock Analysis Report
KELLOGG CO (K): Free Stock Analysis Report
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