General Mills knows that Wheaties and Cheerios never go out of style

Posted May 8th 2008 4:46PM by Joseph Lazzaro
Filed under: General Mills (GIS), Stocks to Buy

With the U.S. economy still exhibiting signs of anemic growth (or worse), it's best to consider including a few defensive stocks in your portfolio, and with the aforementioned in mind, General Mills is worth an evaluation.

General Mills, Inc. (NYSE: GIS) is the second largest U.S. producer of ready-to-eat breakfast cereals, including several iconic brands, and is a leading producer of other packaged consumer foods.

Most analysts see GIS's FY 2008 revenue advancing 6-8%, followed by a 7-10% rise in FY 2009.

Analysts also like the fact General Mills has braced itself for the higher-cost commodity era as a result of efficiency improvements, productivity gains, and a more-favorable product mix. The Reuters FY 2008/FY 2009 EPS consensus estimates for GIS are $3.48 to $3.78.

Further, GIS's iconic brands [Wheaties, Cheerios, Lucky Charms, Total] have endeared themselves to yet another generation, both domestically and internationally. Moreover, ample room exists to increase international market share, by product, for most categories.

The risks? Analysts are keeping an eye on market share gains by competitor generic cereal brands and GIS's commodity costs.

The First Call mean rating for GIS is: Buy [17 firms]. Mean 2008 target: $66 [high: $69, low: $62].

Stock Analysis: General Mills is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from GIS's shares. Sell/Stop Loss if you were to purchase shares in this company: $46.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: cereal, defensive stocks, General Mills, GIS