General Mills Cautions On Q3 Earnings, Sees Growth In Q4; Backs FY14 Outlook

(RTTNews) - Packaged food company General Mills Inc. (GIS) reported Friday that it expects lower earnings in its third quarter, below analysts' estimates, as sales and operating profit were hurt mainly by lower volume. However, the company projected strong earnings growth in its fourth quarter, and also backed fiscal 2014 forecast for higher earnings.

In pre-market activity, General Mills shares declined $1.41 or 2.76 percent, and traded at $49.60.

For the third quarter, the Minneapolis, Minnesota-based maker of Cheerios and Fiber One cereals expects adjusted earnings per share to be about $0.61-$0.62. In the prior year, the company's reported earnings were $0.60 per share, and adjusted earnings were $0.64 per share. On average, 16 analysts polled by Thomson Reuters expect the company to report earnings of $0.68 per share for the quarter. Analysts' estimates typically exclude special items.

The company noted said its sales and operating profit for the third quarter will reflect approximately 1 percent lower volume, consistent with recent food industry trends in developed markets, as well as negative foreign currency translation effects. The quarterly results would also reflect incremental consumer marketing and merchandising investment in the company's U.S. yogurt business, where response to-date has been encouraging.

Third-quarter operating profit for the company's U.S. Retail segment is expected to be 10 percent to 11 percent below strong year-ago results that grew 13 percent. Total segment operating profit would also be below last year's strong third-quarter level.

The company plans to report detailed third-quarter results on Wednesday, March 19.

However, for the fourth quarter, General Mills expects to record strong double-digit growth in adjusted earnings per share, when the expected rate of input cost inflation, the quarterly tax rate, and the average number of shares outstanding will each be well below prior-year levels.

In the prior year's fourth quarter, reported earnings were $0.55 per share and adjusted earnings were $0.53 per share. Analysts project fourth-quarter earnings of $0.66 per share.

Further ahead, for fiscal 2014, General Mills continues to expect adjusted earnings per share to total between $2.87 and $2.90 per share. Analysts project annual earnings per share of $2.88.

Adjusted earnings per share excludes mark-to-market valuation effects for certain commodities and grain inventories; restructuring and other exit costs; and now also excludes the impact of changes in Venezuelan foreign currency policy.

In the year 2013, reported earnings totaled $2.79 per share, and adjusted earnings totaled $2.69 per share.

In November last year, the company had said that it continues to expect low single-digit growth in net sales, and mid single-digit growth in segment operating profit, along with 3 percent input cost inflation for fiscal 2014.

Consistent with its strong operating cash flows, anticipated earnings growth in 2014, and continuing growth expected in fiscal 2015, General Mills' board of directors earlier this week declared an 8 percent increase in the quarterly dividend, payable May 1 to shareholders of record April 10.