* Earnings of $0.64 per share top Wall Street view of $0.57
* Raises full-year outlook by 1 cent per share
* Expects higher costs to hurt fourth-quarter earnings
* Shares up 3 percent
By Martinne Geller
March 20 General Mills Inc reported
better-than-expected third-quarter earnings on Wednesday after
sales volume of its core brands rose for the first time in two
years, a good sign for the U.S. packaged food industry.
The maker of Cheerios cereal, Progresso soups and
Haagen-Dazs ice cream saw its shares rise more than 3 percent to
their highest level in at least three decades.
So far this year the shares are up 19 percent, with much of
that coming in the wake of the Berkshire Hathaway and
3G Capital deal for H.J. Heinz, which has boosted
valuations for many food companies, said Edward Jones analyst
Still, Russo said General Mills has been performing better
in some of its challenged businesses, including cereal and
"It looks like they're reinvesting back into the business,
which is always smart," Russo said.
Excluding the benefit from the recent acquisitions of Yoki
Alimentos in Brazil and Yoplait Canada, General Mills said sales
by volume rose 1 percent. That is the first gain since the third
quarter of fiscal 2011 for that closely watched metric. In the
intervening period, the company had raised prices on many of its
products to offset unprecedented commodity cost inflation, which
"We think the consumer environment is improving," Chief
Executive Ken Powell said in an interview on Wednesday. "As the
price comparison moderates, the consumer is coming back."
In the third quarter, ended on Feb. 24, net income rose to
$398.4 million, or 60 cents per share, from $391.5 million, or
58 cents per share, a year earlier.
Excluding items such as the costs of valuing commodity
hedges and integrating recent acquisitions, earnings were 64
cents per share. On that basis, analysts on average were
expecting 57 cents, according to Thomson Reuters I/B/E/S.
Net sales rose 7.5 percent to $4.43 billion.
Excluding the acquisitions, net sales grew 2 percent, with 1
percentage point coming from higher sales volume.
CURRENT QUARTER PRESSURED
General Mills lifted its full-year outlook by only a penny
per share due to higher costs in the current fourth quarter
related to a comparatively higher tax rate and commodity costs.
The company said fourth quarter earnings would be lower than a
For fiscal 2013, which ends in May, General Mills forecast
earnings, excluding items, of $2.66 per share to $2.68 per
share, versus a prior range of $2.65 per share to $2.67. For the
full year, General Mills said it expected costs of raw
materials, which include fuel and grain, to rise 3 percent.
While the packaged food industry has suffered in the United
States because of lingering economic uncertainty, General Mills
has faced some particular challenges. Its Yoplait yogurt has
been pressured by the strength of Greek yogurts like the one
made by Chobani Inc, while its cereal business has faced
increased competition from other breakfast choices.
Sales for both segments declined in the third quarter, but
General Mills said trends were getting better.
For fiscal 2014, the company expects high single-digit
earnings growth, which it said was in line with its long-term
General Mills shares rose $1.36 to $47.78 on the New York