General Mills Inc. (GIS) announced its financial results for the fourth quarter of 2011 on June 29 with operating earnings of 52 cents a share, in line the Zacks Consensus Estimate.
Earnings for the full year 2011 went up 7.8% year over year to $2.48 per share. The full year earnings matched the Zacks Consensus Estimate.
Below, we have dealt with the recent earnings announcement, subsequent analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation for the stock.
Earnings Recap
General Mills fourth-quarter and fiscal 2011 earnings surpassed estimates having benefited from mark-to-market effects, holistic margin management (HMM) cost savings and better price realization.
Total revenue for the reported quarter grew only marginally by 3% year over year to $3,634.3 million. For fiscal year 2011, reported revenue inched up by 1.7% to $14,880.2 million from $14,635.6 million in the previous year.
Both quarterly and fiscal revenues missed the Zacks Consensus Estimates of $3.7 billion and $14.9 billion, respectively.
Management’s Guidance for 2012
Management expects its fiscal 2012 earnings to be in the range of $2.60 – $2.62 a share. Excluding mark-to-market effects and the tax charge related to health care legislation, the fiscal 2011 earnings guidance reflects an annual growth of 5% – 6%.
The company expects input cost inflation of 10 to 11 percent in 2012. However, the company is ready to combat this cost pressure with HMM’s disciplined cost savings, mix management and price realization to a large extent. Segment operating profits are expected to grow at a low single-digit rate in fiscal 2012.
(Read our full coverage on this earnings report: General Mills' EPS Touches Mark)
Agreement of Estimate Revisions
In the last 7 days, none of the 15 analysts covering the stock have revised their estimates for the first quarter as well as fiscal 2012.
This indicates no clear directional movement for fiscal year earnings and signifies that the analysts are circumspect about the long-term earnings trend of the company.
Management believes that the company has strong operating income, and is trying to curtail its increasing costs.
Magnitude of Estimate Revisions
Earnings estimates for first quarter 2012 have decreased by 1 cent in the last 30 days to 62 cents. For fiscal 2012, earnings estimates have slipped by 7 cents to $2.61 during the last 6 days.
During the fourth quarter of fiscal 2011, General Mills entered into definitive agreements with PAI Partners and Sodiaal International to purchase a 51 percent controlling interest in Yoplait S.A.S. and a 50 percent interest in Yoplait Marques S.A.S for approximately $1.2 billion. The deal is expected to finalize in the first quarter of fiscal 2012.
Our Recommendation
General Mills, which faces stiff competition from Kellogg Company (K) and Seneca Foods Corp. (SENEA) currently, holds a Zacks #4 Rank. On a long-term basis, the company retains a ‘Neutral’ rating on the stock, with a short-term Sell rating.
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