General Mills, Inc (GIS) manufactures and markets branded consumer foods worldwide. The company also supplies branded and unbranded food products to the food service and commercial baking industries. The Company’s businesses are organized into three operating segments: U.S. Retail, International, and Bakeries and Foodservice.
General Mills announced a 8.2% increase in its quarterly dividend on Tuesday. The quarterly dividend will be increased to 33 cents per share from 30.5 cents per share, which will increase the company additional expenses of $64.7 million each year. The new quarterly dividend is payable August. 1, 2012, to shareholders of record July 10, 2012. The current dividend yield will reach 3.20% with a payout ratio of 52.0%; this means the company still has big potential to lift its yield in the future. General Mills has been paying dividends since 1898 and raised its dividend payouts for 8 consecutive years.
The food industry currently is struggling with growing input costs and volume expansion concerns that are offsetting benefits from increased prices. Although analysts still expect healthy growth in revenues, growing costs can undo most of the gains, imposing pressure on earnings. General Mills’ level of profitability declined in recent quarters, and the company is trying to offset rising raw material costs by raising prices and reducing the product specifications. Last month, General Mills announced a restructuring plan, including the cut of about 2 percent of its employees worldwide.
General Mills is marking efforts to introduce more products in fast growing food categories can drive its long-term growth. The company will start shipping 40 new yogurt products next month as it tries to play catchup against Greek-style yogurt in the U.S. market. General Mills bought a controlling interest in Yoplait S.A.S. for $1.2 billion last year. But yogurt sales have been falling due to increasing competition from Greek-style yogurt even as the food giant has tried to boost production for Greek yogurt.
According to a survey of analysts by FactSet Research, General Mills is expected to post earnings of 59 cents a share for its fiscal fourth quarter, on sales of $4.12 billion.
General Mills’ third-quarter 2012 earnings was 55 cents per share. The company recognized $4.12 billion in total revenue for the third quarter, representing a advance of 13% year over year, driven by strong net price realization and benefits from the July 2011 acquisition of interest in Yoplait entities. Solid top-line growth was offset by significant input cost pressures and lower volumes in the U.S. retail segment to pull down margins.
To our joy, the company’s international segment is performing well and generating consistent revenue and profit growth.
The consensus analyst recommendation on General Mills stock is “Overweight” and the average target price is $42.29, which representing an upward 9.22% potential for GIS stock, compared to the latest closing price of $38.15.
GIS shares trade 16.30 times trailing twelve months earnings and 13.87 times forward fiscal year earnings.The 2.12. PEG ratio of the stock is modest, compared to the company’s competitor: Kellogg Company (K) with a PEG ratio of 2.39 and the industry avearge of 1.73.
70% of GIS stock is held by % institutional & Mutual Fund owners, this signals a relative solid fundamentals of the company, as big institutions know what they are doing.
Although GIS stock price of $38.15 is below the 50 day moving average of $38.28 and 200 day moving average of $38.27, according to these factors mentioned above, once the U.S. retail volumes improve, margin pressures due to input cost reduce and the macroeconomic environment recovers, the GIS stock will usher a upward channel. As cut and dried clich, we should buy a stock’s future.