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General Mills Q1 Earnings Preview: Will GIS Stock Continue Its Run?

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General Mills (GIS - Free Report) is set to report its first quarter earnings before the opening bell on Wednesday. The food giant has been on a solid run in 2019, up 42.2% year-to-date, outpacing the broader market and industry peers like Medifast (MED - Free Report) , J&J Snacks and Foods (JJSF - Free Report) and Nestle (NSRGY - Free Report) .

General Mills has recently benefited from its acquisition of pet food company Blue Buffalo. Can GIS shares continue to outperform the broader food market in its new fiscal year? Let’s take a closer look at the company and how it might perform going forward.

Overview and Q4 Recap

General Mills is based out of Minneapolis, Minnesota, and is a global manufacturer and marketer of branded consumer foods sold through various retail stores. The food giant reports the operations of its company in five separate segments: North America Retail, Convenience Stores and Foodservice, Europe and Australia, Asia and Latin America, and Pet.

In Q4, the pre-packaged food firm reported a bottom-line jump of 6% to $0.83 per share to beat our estimate by 9.21%. On the revenue front, General Mills reported a net sales spike of 7% to $4.16 billion, but fell short of our estimate by 1.56%.

The North American retail segment slipped 1.9% to $2.34 billion, while Convenience Stores and Foodservice climbed 1.6%. Europe and Australia sales dropped 10.2% and Asia and Latin America tumbled 9.1%. General Mills’ Pet segment, comprised of its recently acquired Blue Buffalo, attributed $405.6 million in sales.

Q1 and Beyond Outlook

Our Q1 consensus estimates project earnings to climb 7.98% to $0.77 per share. Meanwhile revenue is projected to slip 0.05% to $4.09 billion. Key Company Metric estimates forecast North American retail sales to rise 0.15% to $2.39 billion, and for Convenience Stores and Foodservice revenue to pop 1.57% to $470.5 million.

Furthermore, Europe and Australia sales are anticipated to fall 2.74% to $486.98 million and Asia and Latin American revenue is forecasted to decline 1.76% to $391.98 million. The pet segment is predicted to reel in $364.1 million, for a 6.06% Y/Y gain.

Looking ahead to fiscal 2020, estimates call for earnings to rise 4.57% to $3.37 per share and for sales to leap 3.29% to $17.42 billion. The food enterprise’s fiscal 2020 earnings are expected to expand between 3%-5% over the $3.22 per share GIS reported last year. General Mills has beaten our bottom line estimates the past four reported quarters with an average EPS surprise of 11.35%.

Bottom Line

General Mills is focused on getting its recently acquired pet food enterprise, Blue Buffalo, to the next level in 2020. GIS intends to increase US pet sales by 8%-10% in the coming year, with growth targeted in the specialty sales and e-commerce channels. While General Mills is fixated on accelerating its pet food sales, other areas of its business are also in need of some growth initiatives.

General Mills is a Zacks Rank #3 (Hold) with a Style Score of A for Growth. GIS stock is currently trading right around its 52-week high of $56.40. The food giant might need to impress investors with better than expected financials or an upbeat guidance to propel its valuation past its current 52-week high.

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