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What???s in Store for General Mills (GIS) in Q1 Earnings?
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General Mills Inc. (GIS - Free Report) is set to report first-quarter fiscal 2017 results on Sep 21, before the market opens. Last quarter, the company delivered a positive earnings surprise of 10.00%.
Despite soft sales figures, this branded consumer foods company delivered positive earnings surprises in each of the last four quarters with an average positive surprise of 7.33%.
Let’s see how things are shaping up for this announcement.
Factors at Play
Sales and profits at General Mills’ U.S. Retail segment, which contributes 60% to its sales, have been soft due to weak demand amid changing consumer food preferences. Nevertheless, the company is focused on various restructuring initiatives that are offsetting sluggish top-line growth at General Mills.
For fiscal 2017, total segment operating profit growth is expected to be in the range of 6–8% on a constant-currency basis. Adjusted operating margin, which was 16.8% in fiscal 2016,is expected to expand approximately 150 bps, supported by restructuring and project savings, zero-based budgeting and a favorable mix.
Adjusted earnings per share (constant currency) are expected to grow in the range of 6–8% from the fiscal 2016 level of $2.92 per share. This translates into fiscal first-quarter adjusted earnings of $3.09–$3.15 per share.
However, the company has already indicated that its first-quarter fiscal 2017 organic sales will be below the full-year guidance (flat to down 2%), while EPS comes in below the year-ago quarter level, which had registered 36% growth in constant currency.
Again, though consumer-focused innovation and marketing as well as greater distribution of the natural and organic product portfolio drove revenues in segments like cereals and snacks in fiscal 2016, we believe a material improvement will need more time to materialize.
For the fiscal first quarter, the Zacks Consensus Estimate for earnings stands at 76 cents a share, reflecting a 3.8% year-over-year decrease. Meanwhile, our estimate for revenues is pegged at $3.90 billion, implying a 7.2% drop.
Our proven model does not conclusively show that General Mills is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as you will see below.
Zacks ESP: General Mills’ Earnings ESP is 0.00%. This is because the Most Accurate estimate of 76 cents is in line with the Zacks Consensus Estimate.
Zacks Rank: General Mills has a Zacks Rank #4. As it is, we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated) going into the earnings season, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some food stocks that you may consider, as they have both a positive Earnings ESP and a favorable Zacks Rank ahead of their upcoming releases:
Craft Brew Alliance, Inc. has an Earnings ESP of +6.25% and a Zacks Rank #3. The company is expected to report third-quarter 2016 results on Nov 2.
Inter Parfums Inc. (IPAR - Free Report) has an Earnings ESP of +6.38% and a Zacks Rank #2. The company is expected to report third-quarter 2016 results on Nov 14.
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What???s in Store for General Mills (GIS) in Q1 Earnings?
General Mills Inc. (GIS - Free Report) is set to report first-quarter fiscal 2017 results on Sep 21, before the market opens. Last quarter, the company delivered a positive earnings surprise of 10.00%.
Despite soft sales figures, this branded consumer foods company delivered positive earnings surprises in each of the last four quarters with an average positive surprise of 7.33%.
Let’s see how things are shaping up for this announcement.
Factors at Play
Sales and profits at General Mills’ U.S. Retail segment, which contributes 60% to its sales, have been soft due to weak demand amid changing consumer food preferences. Nevertheless, the company is focused on various restructuring initiatives that are offsetting sluggish top-line growth at General Mills.
For fiscal 2017, total segment operating profit growth is expected to be in the range of 6–8% on a constant-currency basis. Adjusted operating margin, which was 16.8% in fiscal 2016,is expected to expand approximately 150 bps, supported by restructuring and project savings, zero-based budgeting and a favorable mix.
Adjusted earnings per share (constant currency) are expected to grow in the range of 6–8% from the fiscal 2016 level of $2.92 per share. This translates into fiscal first-quarter adjusted earnings of $3.09–$3.15 per share.
However, the company has already indicated that its first-quarter fiscal 2017 organic sales will be below the full-year guidance (flat to down 2%), while EPS comes in below the year-ago quarter level, which had registered 36% growth in constant currency.
Again, though consumer-focused innovation and marketing as well as greater distribution of the natural and organic product portfolio drove revenues in segments like cereals and snacks in fiscal 2016, we believe a material improvement will need more time to materialize.
For the fiscal first quarter, the Zacks Consensus Estimate for earnings stands at 76 cents a share, reflecting a 3.8% year-over-year decrease. Meanwhile, our estimate for revenues is pegged at $3.90 billion, implying a 7.2% drop.
Price and EPS Surprise
Price and EPS Surprise | Quote
Earnings Whispers
Our proven model does not conclusively show that General Mills is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as you will see below.
Zacks ESP: General Mills’ Earnings ESP is 0.00%. This is because the Most Accurate estimate of 76 cents is in line with the Zacks Consensus Estimate.
Zacks Rank: General Mills has a Zacks Rank #4. As it is, we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated) going into the earnings season, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some food stocks that you may consider, as they have both a positive Earnings ESP and a favorable Zacks Rank ahead of their upcoming releases:
Craft Brew Alliance, Inc. has an Earnings ESP of +6.25% and a Zacks Rank #3. The company is expected to report third-quarter 2016 results on Nov 2.
Nu Skin Enterprises Inc. (NUS - Free Report) has an Earnings ESP of +1.21%. The company is expected to report third-quarter 2016 results on Nov 3. It has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Inter Parfums Inc. (IPAR - Free Report) has an Earnings ESP of +6.38% and a Zacks Rank #2. The company is expected to report third-quarter 2016 results on Nov 14.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>