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General Mills’ Stock Reaction to Its 1Q16 Earnings Release

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Stock price performance

On September 22, 2015, General Mills (GIS) reported its first quarter performance results for fiscal 2016. Its stock, which trades on the NYSE (New York Stock Exchange), had been following a rising trend this month. However, the company’s stock fell by 1.58% on September 18.

Following the earnings release, the stock went up by ~1%, closing at $57.13 on September 22. It has been trading in the range of $55–$57 in the last one-month period.

General Mills’ stock closed at $57.41 on September 23, 2015.

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Key highlights of 1Q16

Here’s the most recent General Mills breakdown:

  • Net sales declined by 1% to $4.21 billion. On a constant-currency basis, net sales increased by 4%.
  • Segment operating profit totaled $826 million, up by 20%. In constant currency, total segment operating profit increased by 23%.
  • Diluted EPS (earnings per share) totaled $.069 compared to $0.55 one year ago.
  • Adjusted diluted EPS, which excludes certain items that affect the comparability of results, totaled $0.79 cents in 1Q16.
  • In comparison to last year’s first quarter, diluted EPS is up by 30% from $.061.
  • On a constant-currency basis, adjusted diluted EPS increased by 36%.

General Mills’ main competitors in the industry are Hormel Foods Corporation (HRL), B&G Foods (BGS), and Campbell Soup Company (CPB). All the three stocks trade on the NYSE and closed at $61.20, $36.56, and $51.14, respectively, on September 24, 2015. The Vanguard Consumer Staples ETF (VDC) invests 1.86% in GIS, while the Fidelity MSCI Consumer Staples Index ETF (FSTA) invests 1.85% of its total portfolio in the company.

Management’s remarks

General Mills Chairman and Chief Executive Officer Ken Powell recently said that “In July, we said our 2016 plans anticipated strong first-quarter growth thanks to our expanded Consumer First initiatives, the benefit of our cost-savings projects, and an easy prior-year comparison.”

The management also reported that the company’s US Retail segment posted a 4% net sales growth in the first quarter. This rise included increases in the company’s cereal, meals, yogurt, and snacks businesses. The net sales for its Convenience Stores and Food Service segment increased by 1%. Its International segment achieved a 5% net sales growth in constant currency, led by excellent results in Europe and Canada.

These strong net sales performances, combined with significant margin expansion efforts, drove the company’s double-digit growth in total segment operating profits and adjusted diluted EPS. These results represent a positive first step in delivering the company’s fiscal 2016 growth objectives.

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