After General Mills, Inc. (NYSE: GIS) stock dropped nearly 9 percent following its fiscal third-quarter earnings report in March, investors are hoping the company can clear lowered expectations when it reports fourth-quarter earnings on Wednesday morning. Analysts are looking for modest earnings growth and flat revenue growth in the quarter but will also be watching several other key factors.
Analysts are expecting fourth-quarter earnings per share of 75 cents on revenue of $3.8 billion. That revenue number would represent a decline of 0.1 percent from a year ago.
General Mills blamed rising commodity and shipping costs for its disappointing third quarter.
Bank of America analyst Bryan Spillane is predicting a 3-cent EPS miss on Wednesday. Spillane is forecasting organic sales growth of 1 percent and operating profit growth of 4.8 percent for the quarter.
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“Investors will be focused on how well GIS can transition from fiscal 2018, which had more of a promotional bias, to fiscal 2019, which we expect to have more price/mix,” Spillane says.
For the full fiscal 2018, Bank of America is expecting a 0.3 percent decline in organic sales growth, slightly below the company’s flat guidance. Spillane is also calling for a full-year operating profit decline of 6.3 percent, below General Mills’ guidance for a decline of between 5 and 6 percent.
Looking ahead to fiscal 2019, Bank of America is forecasting EPS of $3, below consensus forecasts of $3.19. The firm is also expecting EPS of $3.18 in fiscal 2020, again below consensus forecasts of $3.37.
Spillane says costs will continue to be a drag on General Mills earnings.
“We expect operating profits will be restrained by mid-single digit [cost of goods sold] inflation and reinvestment of tax savings behind capabilities and accelerator platforms,” Spillane says.
While General Mills may be able to deliver long-term earnings growth at or above its large-cap peers, Spillane says the stock is currently trading at about 16 times projected fiscal 2019 EPS, an appropriate premium to its peer group’s average forward earnings multiple of 15.4.
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Bank of America has a “neutral” rating and $49 price target for GIS stock.
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General Mills, Inc. Earnings Preview: What to Expect from GIS Stock originally appeared on usnews.com
