Categories AlphaGraphs, Earnings, Retail

Earnings preview: General Mills bets on pet-food division to sustain growth in Q3

General Mills (GIS), the company that makes the popular cereal brand Cheerios, is expected to report earnings of $0.69 per share for the third quarter of 2019, representing a 13% contraction from the prior-year quarter. The results will be published Wednesday before the opening bell. Analysts, however, see an 8% increase in revenues to $4.19 billion.

The company’s track record of giving positive earnings surprises points to a high chance of third-quarter results beating the Street view. In the trailing four quarters, earnings either exceeded or matched estimates.

General Mills’ overall performance could benefit from the recent improvement in its core business, which has witnessed softness throughout last year. The highlight, however, is the steady growth of the company’s pet food division. The recently-purchased Blue Buffalo has been a key growth driver, especially after the pet food brand was expanded to Walmart (WMT).

Overall performance could benefit from the recent improvement in its core business, which has witnessed softness throughout last year

Citing these positive factors, and also the ongoing investments in brands, expansion of the supply chain and revamped product portfolio, brokerage Deutsche Bank this week raised its rating on the stock to buy from hold.

While better pricing and the management’s cost-cutting efforts support the margins, growth could be limited by higher input costs and transportation expenses.

Meanwhile, the company’s soup and snacks businesses continue to experience weakness. The other risks to top-line growth include the pressure on organic volumes due to the persistent weakness in the core business and unfavorable exchange rates.

Related: Campbell Soup Q2 results beat expectations

Three months ago, the Minnesota-based consumer foods company had reported a 5% annual growth in its November-quarter revenues to $4.41 billion, while earnings dropped about 20% to $0.57 per share and missed the estimates.

General Mills stock has been gaining steadily since the final weeks of last year and is currently trading at the highest level in more than a year, outperforming the sector. The stock, however, dropped 6% over the past twelve months.


Listen to on-demand earnings calls and hear how management responds to analysts’ questions

Most Popular

Does Unity Software (U) stock has more room to run?

Last month, the IPO market was in a full swing. IPOs of Snowflake (NYSE: SNOW) and JFROG (NASDAQ: FROG) had an impressive opening day in September, the former creating a

PepsiCo (PEP): Steady snacking habits amid pandemic drive strong quarter for beverage giant

PepsiCo Inc. (NASDAQ: PEP) beat market expectations on both revenue and earnings for the third quarter of 2020. The company saw the momentum continue in its snacks business while the

Does the virus-driven boom make Electronic Arts (EA) a good investment?

With more and more people turning to virtual entertainment sources, amid the virus-related movement restrictions, video game publishers like Electronic Arts (NASDAQ: EA) are witnessing unusually high demand. Not surprisingly,

Leave a Reply

Your email address will not be published. Required fields are marked *

Add Comment

Viewing Highlight