General Mills Glides Higher
Stocks: (GIS)(K)
General Mills (GIS) yesterday raised guidance for the 2006 fiscal year. The company's fiscal ended on May 28, 2006. Diluted EPS is now expected to be $2.90 instead of the $2.80 to $2.85 previously forecast.
The company also said in talking about 2007 that its plans for the next year " include targets of low single-digit growth in net sales and mid single-digit growth in segment operating profits". Hardly awe-inspiring.
Even with the slight bump in EPS estimate, General Mills has hardsly been on fire. The topline growth in the last three fiscal years has been tepid. From 2004 to 2005, revenue grew from $11.1 billion to a little over $11.2 billion. Operating income dropped from $2 billion to under $1.8 billion over the same period. The last two quarters, ending November 27, 2005 and February 26, 2006, showed a sharp sequential decline. Revenue in the November period was $3.4 billion, and dropped to under $2.9 billion in the February period. Operating income also dropped from $643 million to $455 million.
Marketing costs at General Mills have also been going up recently, cutting into the company's margins. If commodity prices remain high, it could also hurt the company.
Kellogg continues to have a large portion of the cereal business, and this could keep the pricing pressure on the General Mills product line.
After a sharp drop in the stock price a little less than a year ago from around $51 to under $46, the stock has recovered to $51.46, near its 52-week high of $52.29, setting it forward PE at 16.
With Kellogg's forward PE at 17, and General Mills modest guidance, it appears that the stock may have run as far as it can.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does now own securities in companies that he writes about.
General Mills (GIS) yesterday raised guidance for the 2006 fiscal year. The company's fiscal ended on May 28, 2006. Diluted EPS is now expected to be $2.90 instead of the $2.80 to $2.85 previously forecast.
The company also said in talking about 2007 that its plans for the next year " include targets of low single-digit growth in net sales and mid single-digit growth in segment operating profits". Hardly awe-inspiring.
Even with the slight bump in EPS estimate, General Mills has hardsly been on fire. The topline growth in the last three fiscal years has been tepid. From 2004 to 2005, revenue grew from $11.1 billion to a little over $11.2 billion. Operating income dropped from $2 billion to under $1.8 billion over the same period. The last two quarters, ending November 27, 2005 and February 26, 2006, showed a sharp sequential decline. Revenue in the November period was $3.4 billion, and dropped to under $2.9 billion in the February period. Operating income also dropped from $643 million to $455 million.
Marketing costs at General Mills have also been going up recently, cutting into the company's margins. If commodity prices remain high, it could also hurt the company.
Kellogg continues to have a large portion of the cereal business, and this could keep the pricing pressure on the General Mills product line.
After a sharp drop in the stock price a little less than a year ago from around $51 to under $46, the stock has recovered to $51.46, near its 52-week high of $52.29, setting it forward PE at 16.
With Kellogg's forward PE at 17, and General Mills modest guidance, it appears that the stock may have run as far as it can.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does now own securities in companies that he writes about.
posted by douglas mcintyre at 7:42 AM
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