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General Mills (GIS)
Has General Mills Found the Recipe for Success?
You might consider recent sales of brand name food products, such as those items manufactured and sold by General Mills, as somewhat of a conundrum. On the one hand, maybe sales of brand name products are decreasing, as customers attempt to save money by purchasing store brand items. On the other hand, perhaps more people are sacrificing their frequent meals out at restaurants, and instead have returned to more frequent grocery shopping trips, and are picking up brands they are familiar with. Well, based on the earnings report announced by General Mills this morning, the answer seemed pretty clear, at least for General Mills. So, in which direction are sales trending, and why?
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Fortunately for General Mills, it appears that the second situation is the case, at least when it comes to General Mills products. The company includes well-known brands such as Cheerios, Progresso, Betty Crocker, Bisquick, Pillsbury, and Yoplait. Although some other companies have pointed to a increasing trend with store brand items, many consumers have remained loyal to the brands they know and trust from General Mills.
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For the fourth quarter, the company reported earnings of $358.8 million, or $1.07 per share; almost an 100% increase from the year before, when the company earned $185.2 million, or 53 cents per share. Excluding one-time items, earnings worked out to 86 cents per share, which beat expectations of 81 cents per share. For fiscal 2009, the company ended up at $3.80 per share, beating fiscal 2008's amount of $3.71 per share. Sales also jumped 8% to $14.69 billion.
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Based on the good performance this year, General Mills remains optimistic that they will continue to do well next year, and in fact hopes to do even better! They announced an outlook for fiscal 2010 in the range of $4.20 to $4.25 per share. Analysts are predicting something slightly lower, at an average of $4.18 per share. The company hopes that some of the new products they have been releasing will be unique and appealing enough to attract customers who might have otherwise tended to purchase from another brand; this includes new varieties of Cheerios and Yoplait yogurt, and also products which contain important dietary features such as being high-fiber or gluten-free.
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One of the biggest concerns that the company is facing is the currency exchange rate; the rates are unfavorable to General Mills, and have been calculated to have been reducing the sales values significantly. This has affected them in the past year, and it is expected that this will continue to affect them in the upcoming year. In some cases, the company has had to increase prices in order to try to counteract this. But all in all, the company remains optimistic, and even these concerns could not hold them back from forecasting a very strong upcoming year. If consumers continue to act in the same way, it may be that General Mills has found the recipe for success.
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