Earnings preview: General Mills expected to profit from stay-at-home diners

Posted Jun 30th 2009 5:00PM by Trey Thoelcke
Filed under: Earnings Reports, Forecasts, General Mills (GIS)

Minneapolis-based General Mills Inc. (NYSE: GIS), the largest maker of breakfast cereal in the U.S., is scheduled to discuss its fiscal 2009 fourth-quarter and full-year results tomorrow morning in a conference call at 8:00 AM ET. You can catch the live webcast of the call on the company's website.

For the quarter in which General Mills sold part of its frozen bread dough business and introduced additional gluten-free cereals, analysts polled by Thomson Reuters expect the food maker to report earnings of $0.80 per share, which is 8.8% higher than in the same period of the previous year. Revenue for the quarter is expected to be 6.4% higher to $3.7 billion. The company, whose brands also include Pillsbury, Green Giant, and Haagen-Dazs, topped earnings estimates in four of the five past quarters, but fell short by 8 cents per share in the third quarter.

For the full year, analysts are looking for $3.92 per share (+10.2%) on $14.7 billion (+8.0%). Like other food producers, General Mills has benefited as consumers eat more meals at home during the recession, though there is some concern about consumers who may trade down to store brands to save even more money. But General Mills has also benefited from raising prices last year to offset rising ingredient costs.

Also, General Mills just announced that it raised its quarterly dividend by 9% to 47 cents per share. It has paid uninterrupted dividends -- when its predecessor company is included -- for 110 years.

Analysts, on average, expect the food company's long-term EPS growth rate to be only 6.8%, and the forward PE ratio estimate is 13.0, both of which are lower than rival Kellogg Company (NYSE: K). But the First Call consensus recommendation is to buy GIS; the Motley Fool noted it as an unbelievably solid company and BloggingStocks contributor Sheldon Liber also recommended it recently for its yield and stability.

At $56.02, the share price is 12.4% higher than three months ago, but 7.8% lower than a year ago.

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Tags: dividends, earnings, General Mills, GIS, Kellogg