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Factors to Watch Ahead of General Mills' (GIS) Q2 Earnings

Zacks Equity Research

General Mills, Inc. GIS is slated to report second-quarter fiscal 2020 results on Dec 18. This global manufacturer and marketer of branded consumer foods delivered a positive earnings surprise of 2.6% in the last reported quarter. Moreover, its earnings have outperformed the Zacks Consensus Estimate by 9.3%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for fiscal second-quarter earnings has gone up by a penny to 89 cents over the past 30 days. This suggests an increase of 4.7% from the year-ago period’s reported figure. However, the consensus mark for revenues is $4,407 million, indicating a marginal dip from the figure reported in the year-ago quarter.

General Mills, Inc. Price and EPS Surprise

General Mills, Inc. Price and EPS Surprise

General Mills, Inc. price-eps-surprise | General Mills, Inc. Quote

Key Factors to Note

General Mills has been witnessing weakness in the U.S. Snacks unit for quite some time now, which is weighing on its North America Retail unit’s performance. Also, sales in the Europe & Australia segment have been declining for the last few quarters due to a tough operating environment in France and weak trends in ice cream, among other factors.

We note that these hurdles dented General Mills’ sales in the first quarter, though it received some cushion from the Pet segment — which includes the acquired Blue Buffalo Pet Products. Markedly, Blue Buffalo has been contributing to General Mills’ top line on the back of volume growth and favorable net price realization. Also, expansion in the food, drug and mass network has been a key driver.

Apart from this, General Mills’ key global growth strategies have been yielding results. To this end, the company has been focusing on solid innovation, efficient customer marketing and strong in-store execution. Additionally, the company has been concentrating on improving the U.S. Yogurt business, expanding presence in the emerging nations, stabilizing distribution channels and enhancing price mix. These along with efforts to augment natural and organic products bode well.

We also commend General Mills’ cost-saving initiatives, given the input cost inflation environment. In this regard, the company has been focusing on enhancing efficiency, reducing complexity through SKU optimization, improving supply-chain efficiency and expanding zero-based budgeting across the business. Additionally, the company has been on track with its Holistic Margin Management program.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for General Mills this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

General Mills has a Zacks Rank #3 and an Earnings ESP of +1.58%.

Other Stocks With Favorable Combinations

Here are some other companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

CarMax KMX currently has an Earnings ESP of +0.21% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amazon.com AMZN currently has an Earnings ESP of +1.95% and a Zacks Rank #3.

Hain Celestial HAIN presently has an Earnings ESP of +6.74% and a Zacks Rank #3.

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