General Mills Profit Tops Estimates, Helped by Cost Reductions

Shares gained 1.4% in premarket trading.

Still, revenue edged in slightly below Wall Street expectations, and the maker of Cheerios cereal and Hamburger Helper backed its guidance targets for the year.

The company is expected to report earnings of 69 cents per share on $4.25 billion in revenue.

The Minneapolis, Minnesota-based company posted quarterly net earnings of $426.6 million, or $0.69 per share, compared to $345.2 million, or $0.55 per share, in the year-ago period.

Excluding restructuring-related charges and other special costs, earnings grew to 79 cents a share from 61 cents a share a year earlier. The business had revenue of $4.30 billion for the quarter.

Earlier in September, the company announced the sale of its Le Sueur and Green Giants canned and frozen vegetable brands for over $765 million.

General Mills Chairman and Chief Executive Officer Ken Powell said, “We’re pleased with our progress in the first quarter”.

“The cereal, meals, yogurt and snacks operating units posted net sales gains for the quarter, while sales for the baking products unit were comparable to a year ago “, General Mills said. The company registered growth of 2 percentage points to sales that Annie’s Inc. contributed to the company’s overall topline for the August quarter. Adjusted gross margin, which excludes mark-to-market effects and certain other items affecting comparability, increased 290 basis points due to improved net price realization and savings from our cost-reduction initiatives. The company reported $0.75 EPS for the quarter, topping the Zacks’ consensus estimate of $0.71 by $0.04. The company has eliminated jobs under its Project Compass restructuring plan and is focusing more on promoting its organic products. Morgan Stanley raised shares of General Mills from an “underweight” rating to an “equal weight” rating and lifted their target price for the stock from $53.00 to $56.00 in a research note on Wednesday, September 2nd.

In its global segment, sales fell 11% to $1.2 billion.

First-quarter net sales for the Convenience Stores and Foodservice segment increased 1 percent to $478 million, reflecting increased pound volume. And our worldwide segment achieved 5% net sales growth in constant currency, led by excellent results in Europe and Canada. The stock has a market cap of $34.14 billion and a price-to-earnings ratio of 28.94.