Will General Mills need some Lucky Charms when it posts its Q2 earnings release on Wednesday?
It’s been a long year for the producer of such sugary treats as the Betty Crocker range, Cinnamon Toast Crunch, Trix and, outside of the US, Haagen-Dazs. From a starting price of $61.86 it had fallen to a 3 year nadir of $49.80 by mid-November. Since then it has bounced back somewhat, however, and now sits at a current trading price of $56.97, having hit a 5 and a half month high of $58.18 at the start of December.
(Source: Spreadex, 18/12/2017)
The firm’s 2017 was summed up in September’s Q1 2018 statement, an update that sparked a 6% decline on the day of the release. Revenue came in at $3.77 billion, a 4% decline year-on-year and short of the $3.79 billion forecast, while adjusted diluted earnings per share dropped 9% at constant currency rates to 71 cents, 5 cents off of estimates.
General Mills is one of the casualties of a wider shift in food trends, with consumers moving away from packaged goods to instead trawl the fresh produce aisles. None more so was this evident than in the 7% decline seen in General Mills’ cereal business, with the division doing so bad in the grocery sector as a whole that it could see its shelf space shrink.
As mentioned, things have picked up for the company since its post-Q1 lows, a rebound in part inspired by a brief update in November. There General Mills reiterated its fiscal 2018 full year guidance, with a 1% to 2% slide in organic sales to be countered by a 1% to 2% increase in constant currency EPS.
Framing Wednesday’s Q2 report through that lens may lead to investors being disappointed. While revenue is set to slip 1.2% to $4.06 billion, at the lower end of November’s forecasts, earnings per share is expected to fall 3.2% to 82 cents, far above the upper limit previously stated.
General Mills Inc (NYSE:GIS) has a consensus rating of ‘Hold’ alongside an average target price of $57.19.
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