Q4 Preview: General Mills' (GIS) Macro Commentary Will Be Valuable as Global Uncertainty Widespread

June 26, 2012 4:51 PM EDT Send to a Friend
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Price: $51.96 +0.99%

Rating Summary:
    2 Buy, 8 Hold, 4 Sell

Rating Trend: Down Down

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    Up: 29 | Down: 45 | New: 4
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Shares of General Mills (NYSE: GIS) ended the session near 2012 lows ahead of the company's fourth-quarter results, expected out before the market opens Wednesday morning. The stock closed down nearly 1 percent Tuesday, and is down more than 5 percent since the beginning of January.

Analysts are expecting General Mills to report quarterly earnings of 59 cents per share on sales of $4.11 billion. The company posted third-quarter 2012 EPS of 59 cents on sales of $4.12 billion and fourth-quarter 2011 earnings of 48 cents per share on sales of $3.63 billion.

According to StreetInsider.com's Earnings History page, General Mills has missed earnings estimates by an average of nearly 1 percent over the last four quarters.

The Street seems to be bullish on shares of General Mills: Bloomberg data shows 13 analyst firms with a Buy rating on the stock, eight have a Hold rating, and none recommend selling the stock prior to the results.

Things have been tough for the major consumer food names over the quarter. Shares of Kellogg were slammed 6 percent on April 23rd (just ahead of quarterly results) after the company reduced its FY12 guidance amid weaker-than-expected first-quarter performance. Although General Mills reaffirmed its own full-year outlook in mid-May, the company announced it would be laying off about 850 employees.

Analyst Commentary:
  • Deutsche Bank reiterated a Buy rating ahead of the results, citing "General Mills' leading share in many US categories, HMM productivity, growing intl exposure, relatively low valuation, under-valued Intl JV's, solid balance sheet and well respected mgmt team."

    The firm said investors should focus on: volume performance vs. pricing, management commentary related to the US consumer, and details into trends in the food service and international segments.

    Deutsche is expecting "a conservative approach in forecasting these days."

  • Goldman Sachs pointed to several underlying factors: "sales declines accelerated (-2.9% vs. -2.5% in prior period) despite an easier comparison" and "the two-year stacked volume trend continues to look significantly weak (-17.4% in the current period vs. -17.8% last period) but the minor sequential improvement may suggest that volume losses have bottomed after three periods where the stack trend worsened."

    The firm has General Mills at a Neutral with a $42 price target.
General Mills normally reports its quarterly figures right around 7am ET. Stay tuned to our Earnings category to see the breaking results within seconds of the release. The company will host a webcast at 9am ET to discuss the report.


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