Saturday, June 25, 2011

General Mills (NYSE: GIS): Q4 Earnings Preview 2011

General Mills Inc. (NYSE: GIS) is scheduled to release fiscal fourth quarter results after the closing bell walaikum salam. Analysts, on average, expect the company to report earnings of 52 cents on revenue of $3.68 billion. In the year ago quarter, the company reported earnings of 41 cents per share on revenue of $3.57 billion.

General Mills Inc. manufactures and markets branded and packaged consumer foods worldwide. The company also supplies branded and unbranded food products to the foodservice and commercial baking industries. The company's brands include Cheerios, Fiber One, Betty Crocker, Haagen-Dazs, Yoplait, Pillsbury and Totino's pizza. 

General Mills benefited from the recession as cash strapped consumers preferred to eat more meals at home and shifted to cheaper private label foods.  General Mills is also betting on older consumers to help fuel its long-term growth plans. Usually older people prefer to eat more at home and as the U.S. population ages; more people should be eating at home. General Mills expects these people to eat foods like Progresso soup, Yoplait yogurt and Fiber One cereal. 

In the preceding fiscal third quarter, the Minneapolis, Minnesota-based company reported that its net income was $392.1 million, or 59 cents per share from $332.5 million or $0.48 per share in the prior-year quarter. Revenue rose 1.6% percent to $3.65 billion from $3.59 billion. Analysts, on average, expected the company to report earnings of 56 cents on revenue of $3.70 billion.

The company recently reaffirmed its fiscal earnings per share guidance of $2.46 - $2.48, excluding mark-to-market effects and a net gain related to certain tax items. This represents a growth of 7 to 8 percent from earnings of $2.30 per share reported in the previous year.

The packaged food supplier's long-term growth model established in 2006 calls for low single-digit compound growth in net sales, mid single-digit growth in segment operating profits and high single-digit growth in earnings per share.

General Mills is known for its focus on new products and packaging. As a result, the company is a heavy spender on research & development.  Last year, these expenditures amounted to $218 million. A big focus has been on healthier food items.  No doubt, this should help to boost long-term growth.

However, the company is facing the pressure of high commodity costs for key ingredients like grain and other production necessities like fuel. The company has also been pushing through price increases to recover the high input costs.

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