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RBC Capital Markets Downgrades General Mills to ‘Sector Perform’

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Price movement

General Mills (GIS) has a market cap of $37.7 billion. It fell 0.08% to close at $62.82 per share on December 15, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.54%, 2.5%, and 12.2%, respectively, on the same day.

GIS is trading 1.3% above its 20-day moving average, 1.7% above its 50-day moving average, and 2.2% below its 200-day moving average.

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Related ETF and peers

The Fidelity MSCI Consumer Staples ETF (FSTA) invests 1.9% of its holdings in General Mills. The YTD price movement of FSTA was 5.1% on December 15.

The market caps of General Mills’s competitors are as follows:

  • Kellogg Company (K) — $25.7 billion
  • Hershey (HSY) — $21.0 billion
  • Post Holdings (POST) — $5.0 billion

GIS’s rating

On December 15, 2016, RBC Capital Markets downgraded General Mills’s rating to “sector perform” from “outperform.” It also reduced the stock’s price target to $69.00 from $73.00 per share.

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General Mills’s performance in fiscal 1Q17

General Mills (GIS) reported fiscal 1Q17 net sales of $3.9 billion, a YoY (year-over-year) fall of 7.1% from its net sales of $4.2 billion in fiscal 1Q16. Sales of the US Retail, International, and Convenience Stores & Foodservice segments fell 7.9%, 5.8%, and 6.6%, respectively, between fiscal 1Q16 and fiscal 1Q17.

The company’s net income and EPS (earnings per share) fell to $409.0 million and $0.67, respectively, in fiscal 1Q17, compared with $426.6 million and $0.69 in fiscal 1Q16. It reported adjusted EPS of $0.78 in fiscal 1Q17, a YoY fall of 1.3% from fiscal 1Q16. General Mills’s cash and cash equivalents and inventories rose 0.26% and 9.5%, respectively, between fiscal 4Q16 and fiscal 1Q17.

Quarterly dividend

General Mills declared a quarterly dividend of $0.48 per share on its common stock. The dividend will be paid on February 1, 2017, to shareholders of record on January 10, 2017.

Projections

General Mills (GIS) made the following projections for fiscal 2017:

  • organic net sales growth of 0% to -2%
  • total segment operating profit growth in the range of 6%–8% on a constant currency basis
  • adjusted operating profit margin to expand ~1.5%
  • adjusted EPS growth in the range of 6%–8% on a constant currency basis

In the next part, let’s look at Archer Daniels Midland (ADM).

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