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Will General Mills Miss Sales Estimates Again in Fiscal 4Q16?

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Revenue expectations for 4Q16 and 2016

Analysts are expecting General Mills’ (GIS) revenue to be $3.9 billion for fiscal 4Q16, a decline of 10% compared to 4Q15 revenue of $4.3 billion. The company has missed estimates for the last four quarters. For fiscal 2016, Wall Street analysts expect the revenue to be ~$16.5 billion, a fall of 6%.

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What could affect revenue?

The Annie’s acquisition and the divestiture of the North American Green Giant business are expected to continue to influence revenue in the next quarter as well. The strong US dollar compared to most currencies has been a headwind for most US companies with international operations including General Mills. Currency translation could have an adverse impact on sales in the upcoming quarter as well. Finally, the net impact of acquisitions and divestitures could affect the US Retail segment’s sales. 

General Mills earns its revenue through three segments: the US Retail segment, the Convenience Stores segment, and the International segment. The US Retail segment accounts for almost 60% of General Mills’ revenue every quarter. The company also expects moderate headwinds from the yogurt business.

Outlook for 2016

Management discussed the outlook for 4Q16 and 2016 in its third quarter earnings call. For fiscal 2016, the company expects net sales in constant currency to be down by low-single digits. 2016 results will be affected by the 53rd week and the impact of the Green Giant divestiture. For fiscal 2016, General Mills expects the Green Giant acquisition to have an adverse impact of two percentage points on constant currency net sales growth. The same is projected to have an impact of one percentage point in fiscal 2017. During the second quarter, the company mentioned that it’s taking actions to strengthen its retail sales performance in the second half of 2016. Its continued effort to drive more from its core business is leading to improved sales trends across some key US retail businesses.

Peers’ revenue estimates

General Mills’ peers in the packaged food industry include JM Smucker (SJM), Mead Johnson (MJN), and Kellogg (K).

  • JM Smucker’s revenue for fiscal 1Q17 is expected to fall by 3%.
  • Mead Johnson’s (MJN) revenue for fiscal 2Q16 is projected to fall by 6%.
  • Kellogg’s revenue for fiscal 2Q16 is projected to fall by 4%.

To gain exposure to all of these stocks, you can invest in ETFs such as the Guggenheim S&P Equal Weight Consumer Staples ETF (RHS).

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