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Can General Mills (GIS) Maintain its Earnings Streak in Q2?
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General Mills Inc. (GIS - Free Report) is set to report second-quarter fiscal 2017 results on Dec 20, before the market opens. Last quarter, the company posted a positive earnings surprise of 2.63%.
Despite soft sales figures, this branded consumer foods company has delivered positive earnings surprises in each of the last four quarters, with an average positive surprise of 4.37%.
Let’s see how things are shaping up for this announcement.
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. Since its fiscal first quarter announcement on Sep 21, 2016, the company’s share price has dropped 3.8%. The shares have suffered mostly due to the warning issued by the CDC (UC Center for Disease Control and Prevention). Meanwhile, even through the CDC has announced the end of the investigation on E.coli outbreak from the flour produced at General Mills, the illness will likely continue for some time as the company’s products have long shelf lives.
Nevertheless, the company is focused on various restructuring initiatives that are offsetting sluggish top-line growth at General Mills. As stated in its first-quarter earnings call, the company expects Q2 performance to be better than Q1 from an organic sales growth perspective. Again, it expects better price appreciation in the second quarter compared to the first.
We believe the 2Q17 performance will be driven by product innovation, renovation and the implementation of SRM (strategic revenue management). SRM helps the company optimize its price structure, while generating higher profit growth. The expansion of distribution networks for various brands is also anticipated to contribute to General Mill’s fiscal second-quarter revenues.
Though consumer-focused innovation and marketing as well as greater distribution of the natural and organic product portfolio drove revenues at segments like cereals and snacks in fiscal 2016, we believe a material improvement will need more time to materialize.
General Mills continues to face challenges in its U.S. yogurt business, thanks to persistent decline at its Yoplait Light and Greek 100 product lines.
For the fiscal second quarter, the Zacks Consensus Estimate for earnings stands at 88 cents a share, reflecting a 6.8% year-over-year increase. Meanwhile, our estimate for revenues is pegged at $4.21 billion, implying a 4.81% drop.
Earnings Whispers
Our proven model does not conclusively show that General Mills is likely to beat 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 -1.14%. This is because the Most Accurate estimate of 87 cents is lower than the Zacks Consensus Estimate of 88 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: General Mills has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.
Note that Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some consumer staples stocks that you may consider, as they have both a positive Earnings ESP and a favorable Zacks Rank:
B&G Foods, Inc. (BGS - Free Report) has an Earnings ESP of +2.5% and a Zacks Rank #3. The company is expected to report fourth-quarter 2016 results on Feb 23, 2017.
Constellation Brands, Inc. (STZ - Free Report) has an Earnings ESP of +2.96% and a Zacks Rank #3. The company is expected to report third-quarter fiscal 2017 results on Jan 5, 2017.
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Can General Mills (GIS) Maintain its Earnings Streak in Q2?
General Mills Inc. (GIS - Free Report) is set to report second-quarter fiscal 2017 results on Dec 20, before the market opens. Last quarter, the company posted a positive earnings surprise of 2.63%.
Despite soft sales figures, this branded consumer foods company has delivered positive earnings surprises in each of the last four quarters, with an average positive surprise of 4.37%.
Let’s see how things are shaping up for this announcement.
GENL MILLS Price and EPS Surprise
GENL MILLS Price and EPS Surprise | GENL MILLS Quote
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. Since its fiscal first quarter announcement on Sep 21, 2016, the company’s share price has dropped 3.8%. The shares have suffered mostly due to the warning issued by the CDC (UC Center for Disease Control and Prevention). Meanwhile, even through the CDC has announced the end of the investigation on E.coli outbreak from the flour produced at General Mills, the illness will likely continue for some time as the company’s products have long shelf lives.
Nevertheless, the company is focused on various restructuring initiatives that are offsetting sluggish top-line growth at General Mills. As stated in its first-quarter earnings call, the company expects Q2 performance to be better than Q1 from an organic sales growth perspective. Again, it expects better price appreciation in the second quarter compared to the first.
We believe the 2Q17 performance will be driven by product innovation, renovation and the implementation of SRM (strategic revenue management). SRM helps the company optimize its price structure, while generating higher profit growth. The expansion of distribution networks for various brands is also anticipated to contribute to General Mill’s fiscal second-quarter revenues.
Though consumer-focused innovation and marketing as well as greater distribution of the natural and organic product portfolio drove revenues at segments like cereals and snacks in fiscal 2016, we believe a material improvement will need more time to materialize.
General Mills continues to face challenges in its U.S. yogurt business, thanks to persistent decline at its Yoplait Light and Greek 100 product lines.
For the fiscal second quarter, the Zacks Consensus Estimate for earnings stands at 88 cents a share, reflecting a 6.8% year-over-year increase. Meanwhile, our estimate for revenues is pegged at $4.21 billion, implying a 4.81% drop.
Earnings Whispers
Our proven model does not conclusively show that General Mills is likely to beat 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 -1.14%. This is because the Most Accurate estimate of 87 cents is lower than the Zacks Consensus Estimate of 88 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: General Mills has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.
Note that Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some consumer staples stocks that you may consider, as they have both a positive Earnings ESP and a favorable Zacks Rank:
B&G Foods, Inc. (BGS - Free Report) has an Earnings ESP of +2.5% and a Zacks Rank #3. The company is expected to report fourth-quarter 2016 results on Feb 23, 2017.
Mondelez International, Inc. (MDLZ - Free Report) has an Earnings ESP of +4.08%. The company is expected to report fourth-quarter 2016 results on Feb 1, 2017. It has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Constellation Brands, Inc. (STZ - Free Report) has an Earnings ESP of +2.96% and a Zacks Rank #3. The company is expected to report third-quarter fiscal 2017 results on Jan 5, 2017.
"Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>"