By Annie Gasparro
General Mills Inc. (GIS) plans to announce its fiscal
second-quarter earnings before the market opens on Wednesday. Wall
Street will be watching for a few key things:
EARNINGS FORECAST: Analysts expect net income of 77 cents a
share for the quarter, which ended in November, according to a
survey by Thomson Reuters. That compares to 83 cents for the
quarter last year. General Mills in November estimated adjusted
earnings would be between 75 cents and 77 cents a share and lowered
its expectations for the year.
REVENUE FORECAST: Analysts forecast revenue of $4.79 billion for
the quarter, down 2% from $4.88 billion a year ago. General Mills
said in November it expects its full-year revenue to grow at a
low-single digit rate, excluding foreign currency charges. Several
analysts lowered their expectations at that time.
WHAT TO WATCH:
--BIGGER PIECE OF A SMALLER PIE: General Mills has said that
while cereal sales are down industrywide, it is gaining market
share, having added more cinnamon flavor to Cinnamon Toast Crunch
and protein to Cheerios. But what General Mills really needs is to
revive the cereal category, which has fallen victim to
higher-protein breakfast foods and those that are easier to eat on
the go. Analysts are looking at what General Mills has done not
only for its own brands, but for the whole cereal aisle.
--TWINKLING STARS: They're hardly shining, but there are a few
bright spots in General Mills's portfolio of brands. In the U.S.,
Yoplait yogurt, fruit snacks and frozen pizza are showing some
promise so far this fiscal year, General Mills said in November.
But overall, the composite market share for General Mills brands is
slightly down, as frozen vegetables and dessert mixes like Betty
Crocker struggled. General Mills is expected to elaborate on
changes it's making to its marketing plans to address these
problems.
--ANNIE'S ACQUISITION: General Mills completed its acquisition
of Annie's Inc. for $820 million in October. It paid a high
price--some analysts have suggested too high--for a natural and
organic food brand with just $204 million in sales and $15 million
in profit last fiscal year. General Mills said in September that it
can realize significant cost savings for Annie's, and increase its
distribution. Though it's only been a couple months, General Mills
should be able to say more on the potential of the newest member of
its family.
--PENNY PINCHING: General Mills is closing factories and cutting
salaried jobs as it undergoes multiple cost-cutting efforts
designed to improve efficiency, offset food inflation, and scale
back on production in response to lower demand. Analysts will be
looking for updates on these projects, which are expected to
generate $40 million in savings this fiscal year.
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