General Mills (NYSE:GIS), makers of a range of foods including a slew of General Mills brands cereals, is up in early trading as much as 2% on the strength of its latest earnings report. The company turned in a win on all sides, though sales numbers were seen slipping against this time last year. Financial analysts are urging a note of caution, however, as the company gets back on a non-pandemic normal footing.
General Mills Beats Estimates Amid Sales Slump
General Mills' earnings report featured wins in every class, except net sales. The company turned in adjusted earnings of $0.91 per share against an expected $0.85. Meanwhile, revenue turned in a bit of a mixed report; the company posted $4.5 billion in net sales for the quarter. This beat analyst expectations, but didn't beat the sales posted this time last year. Organic net sales for the quarter were down 6% all told.
Reasons behind that slump are fairly simple, according to the company. One, this quarter actually turned out to be a week shorter than the same quarter last year. That wouldn't account for all the losses, of course, but it would narrow the gap somewhat. Two, the market has changed substantially in that time; the second quarter of last year featured the very worst of pandemic conditions and accompanying lockdowns, which kept people at home in substantially larger numbers, and thus drove demand for at-home eating. General Mills' focus on providing food for at-home eating naturally benefited from those market conditions.
General Mills also offered commentary going forward; the company noted that it expects at-home eating to be higher than it was before the pandemic started, though not as high as it was during the pandemic itself. Additionally, General Mills also released word that the company was restructuring its operations to focus on five primary operations: cereal, ice cream, Mexican food, pet food and snack bars. These five categories combined yield about half of the company's total sales, which makes putting extra focus on them a rational move. General Mills is also considering job cuts, with between 500 and 600 jobs worldwide potentially at risk and 700 to 800 domestic positions in a similar position.
However, General Mills also announced its quarterly dividend, which proved to be an increase from this time last year. General Mills' stock dividend will now be $0.51 per share, which was up 4% against the same time last year. The company has been paying dividends continuously, without interruption, for the last 122 years.
Jeff Harmening, General Mills' chairman and CEO, noted that the General Mills team “...delivered in fiscal 2021 under difficult circumstances,” and further noted that the company was now poised to “...compete and win in a highly dynamic consumer environment.”
How Do Financial Analysts Feel About General Mills Stock?
While General Mills' CEO is looking for a competitive company, financial analysts are less sure about the General Mills stock forecast. The company currently has a consensus rating of “hold”, a rating that's held true for over two years now.
A year ago, the company had seven “buy” ratings to its credit, along with 10 “hold” and one “sell”. Six months ago, that shifted to seven “buy”, seven “hold” and one “sell”. Today, we're at five “buy” and six “hold,” with the sell rating departing the field. Sentiment overall does seem to be shifting a bit toward bullish, but by degrees.
General Mills price targets, meanwhile, occupy a fairly tight range. The current average price of $64.36 is bookended by a high of $73 and a low of $55. With the company trading just a bit under the average price target in today's trading, there is some upside potential on hand.
Recent activity for General Mills stock news has been light but generally positive. Two analysts have chimed in this month, with Royal Bank of Canada reiterating its “hold” rating and its price target of $65, and Deutsche Bank Aktiengesellschaft reiterating its “buy” rating with no price target. The rest of analyst commentary for 2021 has been somewhat negative, with four analysts—Credit Suisse, JPMorgan Chase, Morgan Stanley and Jefferies Financial Group—all lowering their price targets.
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