General Mills Earnings Cheat Sheet: Increased Costs Strain Margins as Profit Drops

Rising costs hurt S&P 500 (NYSE:SPY) component General Mills Inc. (NYSE:GIS) in the first quarter as profit dropped from a year earlier. General Mills, Inc. is the manufacturer and marketer of branded consumer foods sold through retail stores. It also supplies branded and unbranded food products to the food service and commercial baking industries.

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General Mills Earnings Cheat Sheet for the First Quarter

Results: Net income for the processed and packaged goods company fell to $405.6 million (61 cents per share) vs. $472.1 million (70 cents per share) a year earlier. This is a decline of 14.1% from the year earlier quarter.

Revenue: Rose 8.9% to $3.85 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: GIS reported adjusted net income of 64 cents per share. By that measure, the company beat the mean estimate of 62 cents per share. Analysts were expecting revenue of $3.8 billion.

Quoting Management: Chairman and Chief Executive Officer Ken Powell said, “Our net sales grew six percent before the Yoplait acquisition, with gains across all three of our business segments. This reflects good net price realization, resilient consumer demand for our established products, and good early response to new items launched during the quarter. This start to the year has General Mills on track to achieve the key growth targets we’ve set for fiscal 2012.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the fourth quarter of the last fiscal year, net income rose 51.1% from the year earlier, while the figure increased 17.9% in the third quarter of the last fiscal year, 8.6% in the second quarter of the last fiscal year and 12.2% in the first quarter of the last fiscal year.

Gross margin shrank 5.5 percentage points to 37.6%. The contraction appeared to be driven by increased costs, which rose 19.5% from the year earlier quarter while revenue rose 8.9%.

Revenue has now gone up for three straight quarters. In the fourth quarter of the last fiscal year, revenue rose 1.8% to $3.63 billion while the figure rose 0.5% in the third quarter of the last fiscal year from the year earlier.

The company beat estimates last quarter after being in line with expectations in the fourth quarter of the last fiscal year with net income of 52 cents per share.

Competitors to Watch: Ralcorp Holdings, Inc. (NYSE:RAH), Kellogg Company (NYSE:K), Kraft Foods Inc. (NYSE:KFT), ConAgra Foods, Inc. (NYSE:CAG), Diamond Foods, Inc. (NASDAQ:DMND), The Hain Celestial Group, Inc. (NASDAQ:HAIN), The Hershey Company (NYSE:HSY), Nestle SA Reg Shs. Ser. B Spons (NSRGY), TreeHouse Foods Inc. (NYSE:THS), Slancho AD Svishtov (SLR), and Pepsico Inc (NYSE:PEP).

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(Source: Xignite Financials)