General Mills performs like a growth stock

Core brand sales grew since 2011 and performance continues to ramp up.

By Benzinga Mar 21, 2013 11:55AM

Girl grocery shopping with her mother image100 SuperStock By Tim Parker


General Mills (GIS) reported better-than-expected third quarter earnings Wednesday.


Sales of its core brands, such as Cheerios, Progresso soups and Haagen-Dazs ice cream, rose for the first time since 2011, according to Reuters.


Further, GIS shares are up 19% this year. Much of that, says Edward Jones analyst Jack Russo, is in response to the Berkshire Hathaway (BRK.B) and 3G Capital, H.J. Heinz (HNZ) deal, which has boosted share values for many food companies.


Russo says General Mills has been performing better in cereal and yogurt, businesses that have been challenged in recent years due, in part, to increased commodity costs.


"It looks like they're reinvesting back into the business," Russo said. As a result, the company says sales by volume rose 1% for the first time in two years. This despite the fact that the company raised prices on many of its products.


Although General Mills clearly sees the consumer environment improving, there will be challenges going forward.


Higher taxes and commodity costs have caused the company to raise its full-year outlook by only a penny per share. In addition, it said fourth quarter earnings would be lower than a year ago.


The packaged food industry has suffered in the U.S., mostly due to economic uncertainty. GIS has faced unique additional challenges, including pressure on its Yoplait yogurt by emerging Greek brands. The cereal division has also faced increased competition from competitors.


Sales for both segments were down in the third quarter, but General Mills indicated that trends were improving. The company says it expects high single-digit earnings growth over the long term.


Meanwhile, The Street's Jim Cramer picked GIS as one of his Top Stock Picks, saying that the cereal giant has what it takes and has been delivering for its shareholders year after year.


Jefferies continued to maintain a "hold" on GIS, but has raised its price target to $44. BMO Capital maintained its "outperform," and raised the price target to $50. Deutsche Bank maintained a "buy" rating and set a new price target of $53. Stifel Nicolaus reiterated a "buy" rating and raised the price target to $51.


General Mills shares, which closed Wednesday at $47.61, traded 1.4% higher by late morning to $48.28.


More from Benzinga

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

115
115 rated 1
269
269 rated 2
445
445 rated 3
614
614 rated 4
684
684 rated 5
678
678 rated 6
608
608 rated 7
454
454 rated 8
310
310 rated 9
138
138 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ARCPAMERICAN REALTY CAPITAL PROPERTIES Inc10
ATVIACTIVISION BLIZZARD Inc10
BIDUBAIDU Inc10
BMYBRISTOL-MYERS SQUIBB CO.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.