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The Zacks Analyst Blog Highlights: Procter & Gamble, Unilever, Kellogg, Diamond Foods and General Mills

PG UL K DMND GIS

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For Immediate Release

Chicago, IL – March 20, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Procter & Gamble ( (PG - Analyst Report), Unilever Plc. ( (UL - Analyst Report), Kellogg Company ( (K - Analyst Report), Diamond Foods ( (DMND - Analyst Report) and General Mills Inc. ( (GIS - Analyst Report).

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Here are highlights from Monday’s Analyst Blog:

P&G to Build Huge Plant in China

The world’s leading consumer product giant Procter & Gamble ( (PG - Analyst Report) is set to further spread its roots across China, the world’s fastest growing market. P&G has started construction of a manufacturing plant in Luogang, Guangzhou that is being hailed as one of the largest manufacturing sites in Asia.

The new manufacturing plant is expected to add $490 million of production value to the consumer giant every year. The plant, which will come up in 3 stages, is set to begin its first-stage operations by the second half of 2013. The first stage will produce a variety of goods including its signature Pampers diapers.    

The new initiative is a part of the company’s goal to invest as much as $1 billion in China by 2015. As the western world is becoming increasingly saturated, the retail giants are looking more and more towards the eastern world for finding emerging untapped markets.

P&G’s hardcore rival Unilever Plc. ( (UL - Analyst Report) is also not leaving any stone unturned to capture the fast growing market in China. Almost simultaneously with P&G, Unilever has started constructing one of its largest production operations, covering nearly 27 hectares, in the Binhai New Area, a business district in Tianjin. The new plant will make liquid laundry detergent and fabric softeners.

In 2009, P&G announced its goal to bring one billion new customers to the firm by the 2014-15 fiscal years. P&G’s relation with China dates back to 1980, when, in spite of huge skepticism, the retailer introduced its anti-dandruff shampoo ‘Head & Shoulders’ in the country. Till then there was no anti-dandruff shampoo in the Chinese market. P&G’s launch of the anti-dandruff shampoo was a huge success and thereafter the company launched diapers in China.

P&G has announced plans to add around 20 manufacturing plants between 2010 and 2015 in countries like Brazil, China, South Africa, Romania and Poland.

However, last month P&G announced its decision to slash over 4,000 non-manufacturing jobs in US during the current fiscal year. This declaration follows the already planned 1,600 job cuts, announced by the company at the beginning of February 2012.

P&G anticipates that by trimming down 5,700 jobs, it will save up to $10 billion of cost, including $1 billion in marketing costs and $3 billion in overhead costs, by the end of the fiscal year ending in June 2016.  

P&G also managed to shed its Pringles potato chips business by striking a $2.7 billion deal with Kellogg Company ( (K - Analyst Report), after its earlier plan fell apart when Diamond Foods ( (DMND - Analyst Report), the original buyer, became embroiled in some accounting problems.

Currently P&G holds a Zacks #4 Rank (short-term Sell rating). Over the long-term, we maintain a Neutral recommendation on the stock.

Earnings Preview: General Mills

General Mills Inc. ( (GIS - Analyst Report), one of the leading branded foods companies in the US, is scheduled to report its third-quarter 2012 financial results before the opening bellon Wednesday, March 21, 2012. The current Zacks Consensus Estimate for the quarterly earnings is pegged at 56 cents a share.

Consensus Estimates for Third Quarter 2012

Analysts surveyed by Zacks expect General Mills to post third-quarter 2012 earnings of 56 cents a share, which is in line with the prior-year quarter. Analyst estimates for the quarter range from a low of 54 cents to a high of 60 cents.

The current Zacks Consensus Estimate has slipped by 10.0% over the last 30 days; as 9 out of 11 analysts covering the stock revised their estimates downward.

Earnings Surprise History

General Mills’ earnings per share exceeded the Zacks Consensus Estimate inthree of the last four quarters. In those four quarter, earnings surprise ranged from a negative 3.80% to a positive 3.23%, with the average earnings surprise being a negative 0.29%, suggesting that General Mills has underperformed the Zacks Consensus Estimate by that magnitude over that period.

Retains Neutral Recommendation

General Mills has an outstanding portfolio of products and brands, especially its healthy and convenience packages, helping in the company’s growth. Through the Holistic Margin Management (HMM) program, the company manages costs and abates inflation, thus improving margins and gaining over its peers.

However, the company faces stiff competition from rival retail giants as well as from local and regional players in the countries in which it operates. Consequently, the company is under severe pressure to maintain profitability and increase market share.

Currently we maintain a Zacks #3 Rank (Hold), in line with our long-term Neutral recommendation on the shares.

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