General Mills, Inc. (NYSE:GIS) last week reported its latest quarterly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. General Mills reported in line with analyst predictions, delivering revenues of US$4.2b and statutory earnings per share of US$0.74, suggesting the business is executing well and in line with its plan. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on General Mills after the latest results.
Taking into account the latest results, General Mills's 16 analysts currently expect revenues in 2021 to be US$17.0b, approximately in line with the last 12 months. Statutory earnings per share are forecast to shrink 2.4% to US$3.42 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$17.1b and earnings per share (EPS) of US$3.39 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
With the analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 5.2% to US$58.20. It looks as though they previously had some doubts over whether the business would live up to their expectations. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values General Mills at US$65.00 per share, while the most bearish prices it at US$45.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's also worth noting that the years of declining sales look to have come to an end, with the forecast for flat revenues next year. Historically, General Mills's sales have shrunk approximately 1.0% annually over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 2.4% per year. So it's pretty clear that, although revenues are improving, General Mills is still expected to grow slower than the industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for General Mills going out to 2023, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with General Mills , and understanding this should be part of your investment process.
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