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4 Factors That Make General Mills (GIS) a Delightful Stock

Zacks Equity Research

General Mills, Inc. GIS is undoubtedly worth giving a shot, courtesy of its efficient growth strategies. These endeavors along with management’s raised outlook for fiscal 2019 have helped this Zacks Rank #1 (Strong Buy) stock rally close to 25% in the past three months, outpacing the industry’s growth of 4.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let’s take a look at the factors that are set to keep General Mills’ momentum alive.

Focus on Boosting Market Share Through Innovation

The company focuses on maintaining a steady pipeline of products to boost sales and capture market share. With evolving consumer food preferences, General Mills is investing in consumer-focused innovation and marketing. Additionally, the company is investing hugely to accelerate the natural and organic product portfolio, which in turn will boost sales. In this respect, the company expects to reap continued benefits from Annie’s, General Mills’ biggest natural and organic brand. Further, the natural products platform is likely to continue expanding in the forthcoming periods.

Key Global Strategies Bode Well

General Mills is on track with its key global growth strategies to propel consistent sales growth. To this end, the company is focused on solid innovations, efficient customer marketing and strong in-store execution to sharpen its competitive edge. The company’s next main strategy focuses on driving growth across four global platforms, which include Haagen-Dazs ice cream, snack bars, Old El Paso Mexican food, and General Mills’ natural and organic food brands.

Additionally, the company is working toward reshaping its portfolio via prudent buyouts and divestitures. In connection with this, General Mills acquired Blue Buffalo Pet Products in April 2018 and is on track to integrate the same. Management anticipates sales from Blue Buffalo and segment operating profit to grow at a significant pace in the fourth quarter, owing to distribution expansion in the Food, Drug and Mass (FDM) channel.

Cost-Saving Plans

General Mills is currently pursuing many initiatives to generate cost savings and support its key growth strategies. The company expects to achieve cost savings via increased efficiency, reduced complexity (through SKU optimization), supply-chain optimization and continued expansion of zero-based budgeting. Further, the company is on track with its Holistic Margin Management (HMM), which is expected to generate greater savings this year. In fact, management had earlier stated that it expects cost of goods HMM savings of roughly $450 million in fiscal 2019. Moreover, management expects increased savings from this program to aid margin expansion for Blue Buffalo in the fourth quarter of fiscal 2019.

Raised Outlook on Solid Q3

General Mills recently posted solid third-quarter fiscal 2019 results, wherein both top and bottom lines grew year over year and beat estimates. The bottom line was fueled by an increase in adjusted operating profit, which in turn was backed by favorable net price realization, improved mix, HMM savings, stringent cost control and gains from Blue Buffalo’s inclusion.

Notably, the company is on track with its Consumer First strategy and cost-reduction initiatives. Consequently, adjusted operating profit (on cc basis) growth is now expected toward the upper end of the previously projected range of 6-9%. Moreover, management now envisions adjusted earnings per share (on a constant-currency basis) growth to be flat to up 1% compared with flat to down 3% anticipated earlier.

Clearly, General Mills is set to add new flavors to its growth story.

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