Why Upside to GIS Stock Is Limited
Analysts expect GIS to report sluggish 1Q18 results
General Mills (GIS) is set to report its fiscal 1Q18 results on Wednesday next week. Overall, analysts expect the company to report sluggish top-line and bottom-line results, thus restricting the upside to its stock. Analysts project the company’s sales and EPS to fall on a YoY (year-over-year) basis, as falling volumes in North America and adverse currency movements and increased competition among retailers are expected to hurt its top-line and bottom-line results.
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General Mills is focusing on innovation-driven new product launches to turn around its sales. Meanwhile, the company’s increased consumer and trade support activity is further expected to drive the top-line growth. However, the benefits of these efforts are likely to impact the second-half results. In the near term, soft product demand, increased competition from private label players, and price wars among retailers are likely to restrict the sales growth rate and could jeopardize investors’ confidence in the stock.
YTD stock price movement
General Mills stock has mostly disappointed investors in 2017 so far and has fallen 10.5% on a YTD (year-to-date) basis as of September 13, 2017. Meanwhile, it has also underperformed the benchmark index by and large. During the same period, the Consumer Staples Select Sector SPDR ETF (XLP) and the S&P 500 Index (SPX-INDEX) have risen 7.5% and 11.6%, respectively.
Similar to General Mills, most of its peers are also trading in the red. Sluggish sales and a soft near-term outlook are taking a toll on the packaged food manufacturers. For instance, Kraft Heinz (KHC), Conagra (CAG), Campbell Soup (CPB), Kellogg (K), and J.M. Smucker (SJM) are down 6.2%, 12.2%, 21.1%, 7.8%, and 16.4%, respectively.