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Savings Experiment: Snow RemovalGeneral Mills, Inc. (GIS), a food company that competes in the cereal aisles with Kellogg Company (K), performed well in the second quarter. The top line didn't budge too much, but the bottom line moved up 13% to $1.54 on an adjusted basis. Cash from operations really stood out. For the six-month period, over $980 million was generated from business activities. In the comparable frame, over $360 million was booked.
According to our earnings preview, the market was expecting $1.44 per share in net income. What drove the very positive results? I think you can definitely allocate a fair amount of praise to execution. But you can also credit brand power and a more favorable commodity environment as fiscal drivers.
The outlook appears fine to me. The company is anticipating continued growth in earnings after items, and most importantly, it intends on supporting its portfolio of products with solid spending on marketing initiatives. That's what I like to see with businesses like this one: a commitment to expanding the value of the trademarks.
General Mills should retain its fundamental momentum, and that is bound to be attractive to the investor class that favors dividend-paying equities. Management highlighted the fact that the dividend experienced a nice increase.
Shares of General Mills weren't too exciting this afternoon. At the time of this writing, they were up less than 1%. From a trading perspective, I guess everything is already priced in. Either that, or the general weakness of the overall session is putting a limit on the potential buying interest.
No matter. General Mills is for the core portfolio anyway. I expect further dividend increases in the future, and I'm certain the products will remain popular. The big takeaway from today's release is that this cereal concern will be serving up breakfasts for a long time to come, even in the face of expanding competition from private-label products.
Disclosure: I don't own any company mentioned; positions can change without notice.
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