Friday, March 7, 2014

Earnings Preview: General Mills Battles Rising Cost As It Stays Ahead Of Competitors

This article was originally published by GuruFocus

By Sarfaraz A. Khan, Research Assistant: Gohar Yousuf

March 7, 2014
In a recent analyst conference, General Mills (GIS) has reaffirmed its earnings guidance for the current fiscal year. The company will report its next quarterly results on March 19 in which its earnings could come under additional pressure due to two new developments. The company could witness an increase in input costs coming from a lack of genetically modified ingredients and the increasing futures of oat prices.

The company has struggled with growth recently but it has outperformed its competitors. General Mills generates solid free cash flow and therefore, has been able to aggressively grow its dividend over the years. The company offers an attractive yield of 3%, which is above the industry’s average of 2.22%.

Future Outlook

General Mills has reaffirmed its fiscal 2014 guidance. The company is expecting earnings of between $2.87 and $2.90 per share. The company, however, has warned investors that the Venezuelan currency devaluation could have an adverse impact on its profits. In that case, the company has forecast that it would meet the low end of its guidance.

No Genetically Modified Ingredients

The company has responded to the criticism related to its use of genetically modified ingredients in its cereal by opting to remove such ingredients. The business, however, has failed to win over its critics. Investors should note that this decision could lead to an increase in the price of its cereals.

Last month, the company declared that it has stopped using genetically modified ingredients in …. Read full article at GuruFocus