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We have a Neutral recommendation on General Mills Inc. (GIS - Analyst Report) following appraisal of first quarter fiscal 2013 results.

General Mills’ first quarter fiscal 2013 adjusted earnings rose 3.1% year on year to 66 cents per share. The quarterly earnings also beat the Zacks Consensus Estimate of 62 cents and were better than management’s expectations that earnings would drop from the year-ago levels. The upside was driven by recent acquisitions.

Total revenue of the global consumer food company increased 5% year over year to $4.05 billion. Revenues mostly benefited from the addition of Yoplait International in July 2011, Parampara Foods in India, Food Should Taste Good in the United States and Yoplait Ireland in the final quarter of fiscal 2012. The company maintained its full year earnings outlook.

Read our full report at Mixed Results for General Mills.

General Mills has an outstanding portfolio of growth products and brands, especially its healthy and convenience packages. Its popular brands include Big G cereals, Betty Crocker, Pillsbury, Progresso, Hamburger Helper, Yoplait, and Old El Paso. The company’s core brands ranks either the first or second position in some fast growing food categories. The company continues with its efforts to improve its brands in order to build brand equity through strong consumer marketing.

Further, General Mills remains committed toward introducing a steady pipeline of new products in an effort to boost its sales momentum and capture market share. Particularly, in order to drive sales growth, General Mills is looking forward to expand and diversify into five global categories, which account for over 60% of the worldwide sales and deliver foods that are convenient, nutritious and provide good taste at a good value. These categories include ready-to-eat cereal, super-premium ice cream, convenient meals, wholesome snack bars and yogurt. All of these have promising growth potential.

General Mills is dedicated toward expanding its presence outside the U.S. due to low disposable income of consumers and near saturation in the U.S. market. The company is increasing focus on expansion in the emerging markets of China, Brazil, India, and Russia, where the consumer spending growth is positive. In order to tap these fast growing markets, consumer companies are looking to introduce new capabilities and product lines. General Mills also invests in new businesses through complementary acquisitions that build on its marketing strength.

Further, General Mills’ Holistic Margin Management (HMM) program has successfully managed costs and abated inflation, thus improving the company’s margins and gaining over its peers. The program has already delivered its three-year goal of $1 billion in cost savings that was announced in 2010. Moreover, the program is expected to generate additional productivity savings of $3 billion by the year 2020.

We believe the company’s strong brand marketing, continuous innovation, expansion in emerging markets and productivity savings will help it to achieve long-term goals. However, we prefer to remain on the sidelines until the U.S. retail volumes improve, the Yoplait yogurt business delivers encouraging returns and the macroeconomic environment recovers substantially. The company competes with ConAgra Foods, Inc. (CAG - Analyst Report) and Mondelex International (MDLZ - Analyst Report)

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