General Mills (GIS) had impressive earnings in the past five quarters. The company’s bottom line improved on a YoY (year-over-year) basis in the past few quarters despite cost headwinds, the higher outstanding share count, and increased interest expenses. General Mills beat analysts’ expectations in the past five quarters, which is encouraging.
In the fourth quarter, analysts expect General Mills to post an adjusted EPS of $0.77, which implies a YoY decline of 2.5%. Analysts expect input cost headwinds, increased interest expenses due to the Blue Buffalo acquisition, and the higher outstanding share count to drag General Mills’ earnings down on a YoY basis.
We expect cost headwinds to hurt General Mills’ adjusted earnings in the fourth quarter. However, General Mills could continue to beat analysts’ expectations due to the lower effective tax rate and improved margins. A favorable mix and higher net pricing are expected to support the company’s margins. The tax rate is expected to stay low compared to the previous year.
Other major packaged food companies also beat analysts’ EPS expectation due to the lower effective tax rate and a sequential improvement in their margins. J.M. Smucker (SJM) beat analysts’ EPS expectation in the fourth quarter due to lower taxes. Hershey (HSY), Mondelēz International (MDLZ), and Campbell Soup (CPB) also beat analysts’ EPS expectations during the last reported quarter.