Shares of General Mills, Inc. (NYSE: GIS) hit a new all-time high of $75 yesterday after the company posted better-than-expected fourth quarter results, and also increased its quarterly cash common dividends by 6%.
General Mills is a multinational food company that manufactures and markets branded consumer foods through retail stores. GIS stock has gained 12.7% so far this year.
Despite the persistent inflationary pressures and supply chain constraints, the food manufacturer has successfully steered the quarter by taking proactive steps of increasing prices and reshaping its portfolio, thus ensuring that its products remain on the retail shelf for consumers to gorge.
“We plan to build on our strong momentum in fiscal 2023 by continuing to compete effectively, investing in our brands and capabilities, and reshaping our portfolio,” Chairman and CEO Jeff Harmening said.
Results in Detail
GIS reported quarterly adjusted earnings of $1.12 per share, up 23% year-over-year and beating the consensus estimates by $0.11 per share.
Moreover, quarterly net sales rose 8% year-over-year to $4.89 billion and also surpassed the Street estimates by $80 million. Organic net sales jumped 13% compared to the prior year period, driven by an efficient mix of higher prices and profitable sales.
For the full year Fiscal 2022, the company’s adjusted earnings grew 4% annually to $3.94 per share, and net sales surged 5% to $18.99 billion which was also driven by Strategic Revenue Management (SRM) actions undertaken to beat the high prices of input raw materials.
Notably, the company’s Board continued to show its commitment to shareholders by increasing the quarterly cash common dividend to $0.54 per share, representing a yield of 2.89%.
Fiscal 2023 Outlook
Based on the ongoing inflationary environment, the reduced purchasing power of consumers, and supply chain challenges, General Mills expects double-digit inflation pressure on its cost of goods sold in 2023. Meanwhile, supply chain issues are expected to moderate compared to FY22.
For FY23, GIS forecasts organic net sales to grow by four to five percent, and adjusted earnings are expected to remain between flat and grow by 3% over the FY22 figure.
Price Target
Following the results, UBS analyst Cody Ross lifted the price target on GIS stock to $75 (implying shares are fully valued at current levels) from $69, while maintaining a Hold rating.
Surrounded by current macro headwinds, the Street has a Hold consensus rating on the stock based on one Buy and five Holds. The average General Mills price forecast of $71 implies nearly 5% downside potential to current levels.
Stock Analysis
Interestingly, according to TipRanks’ Smart Score, General Mills scores a “Perfect 10,” indicating that the stock is most likely to outperform the market. Bloggers and news articles are bullish on the stock, and hedge funds have increased their holdings of GIS stock by 385,700 shares in the last quarter. And, retail investors have increased their exposure to GIS stock by 2.7% over the last 30 days.
Conclusion
The food and snacking industry is struggling to fend off the inflationary pressures and supply chain constraints, both of which are being managed well by General Mills so far. The management has shown faith in its proactive steps to mitigate the effects going ahead, and has also rewarded shareholders with a dividend hike. Plus, the TipRanks tools suggest that the stock has a high probability to outperform expectations.
