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Here's How General Mills (GIS) is Placed Ahead of Q3 Earnings

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General Mills, Inc. (GIS - Free Report) is scheduled to report third-quarter fiscal 2020 results on Mar 18. This global manufacturer and marketer of branded consumer foods delivered a positive earnings surprise of about 8% in the last reported quarter. Moreover, its earnings outperformed the Zacks Consensus Estimate by 10%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for fiscal third-quarter earnings has declined a penny to 74 cents over the past seven days. This suggests a drop of 10.8% from the year-ago period’s reported figure. The consensus mark for revenues is $4,183 million, indicating a 0.4% dip from the figure reported in the year-ago quarter.

General Mills, Inc. Price and EPS Surprise

General Mills, Inc. Price and EPS Surprise

General Mills, Inc. price-eps-surprise | General Mills, Inc. Quote


Key Factors to Note

General Mills has been seeing softness in the U.S. Snacks unit for quite some time now, which is weighing on the performance of its North America Retail unit. Also, sales in the Europe & Australia segment have been declining for the last few quarters due to a tough operating environment in France and weak trends in ice cream. Nonetheless, management, in its last earnings call, stated that it expects improved trends for the second half of fiscal 2020. The Zacks Consensus Estimate for quarterly sales in Europe & Australia stands at $425 million compared with $433 million in the prior-year period.

Further, General Mills has been benefiting from its Pet segment, which comprises the Blue Buffalo Pet Products. Markedly, Blue Buffalo has been contributing to General Mills’ top line on the back of volume growth and favorable net price realization. Also, expansion in the food, drug and mass network has been a key driver. The consensus mark for third-quarter revenues in the Pet segment is pegged at $382 million compared with $347 million reported in the year-ago period.

Apart from this, General Mills’ focus on innovation, efficient customer marketing and strong in-store execution bodes well. Additionally, the company has been concentrating on improving the U.S. Yogurt business, expanding presence in the emerging nations, stabilizing distribution channels and enhancing price mix.

We also commend General Mills’ cost-saving initiatives. To this end, it is generating savings from the Holistic Margin Management program. These initiatives are noteworthy in the face of an inflated cost environment. Incidentally, General Mills has been battling input cost inflation for a while now. Further, the company expects a mid-teen rise in brand-building investments in the second half of fiscal 2020, which remains a threat to profits.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for General Mills this season around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although General Mills carries a Zacks Rank #3, its Earnings ESP of -1.46% makes surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Hershey (HSY - Free Report) presently has an Earnings ESP of +1.56% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

McCormick (MKC - Free Report) currently has an Earnings ESP of +0.95% and a Zacks Rank #3.

Newell Brands (NWL - Free Report) currently has an Earnings ESP of +3.86% and a Zacks Rank #3.

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