Will General Mills' Second-Quarter Earnings Satisfy?

General Mills (NYSE: GIS  ) is set to report second-quarter results for fiscal 2014 on Wednesday, Dec. 18. It has been a hot stock in 2013, rising 20.14% year to date. The current estimates call for growth on both the top and bottom lines, so let's take a look to see if we should consider buying before the report is released. 

The consumer goods giant
General Mills is the company behind some of the world's most popular brands, including Betty Crocker, Pillsbury, Haagen-Dazs, Green Giant, Progresso, Yoplait, Cheerios and numerous others. It provides products to the U.S. and international retail segments, as well as to food service providers and convenience stores. Currently, General Mills' products are available in more than 100 countries, with offices and manufacturing facilities in more than 30 of them.

Source: General Mills.

Last time out
On Sept. 18, General Mills released first-quarter results for fiscal 2014. Here's a breakdown of the report:

Metric Q1 2014 Q1 2013
Earnings per share $0.70 $0.66
Revenue $4.37 billion $4.05 billion

Earnings per share increased 6.1% and revenue rose 7.9% year over year, as new businesses and products contributed to 5% of the growth. The company's gross margin declined 130 basis points to 36.9%, but this lost ground is expected to be regained throughout fiscal 2014. The U.S. retail segment grew a respectable 4% to $2.58 billion, but international growth was explosive, rising 22% to $1.32 billion. General Mills is an established American powerhouse, but I believe the international segment could one day become the company's largest by several billion dollars. 

Earnings due out
Second-quarter results for fiscal 2014 are due out before the market opens on Wednesday. Here are the current consensus analyst estimates:

Metric Expectations Q2 2013
Earnings per share $0.88 $0.86
Revenue $4.96 billion $4.88 billion

These expectations would result in earnings growth of 2.3% and revenue growth of 1.6% year over year; growth of under 3% is far from impressive, but you must factor in that this is a slow-growth company that will consistently generate free cash flow to distribute to its investors. General Mills has paid dividends uninterrupted and without reduction for 115 consecutive years, and this is the primary reason people love it as an investment. It has raised this dividend for nine consecutive years and currently sports a yield of roughly 3.06%.

Competitor results
Kellogg  (NYSE: K  ) , General Mills' largest competitor in the processed and packaged goods industry, reported third-quarter results on Nov. 4. Here's an overview of the report:

Metric Q3 2013 Q3 2012
Earnings per share $0.95 $0.89
Revenue $3.72 billion $3.72 billion

Earnings per share increased 6.7% and revenue was flat, as Kellogg's gross margin declined 39 basis points to 39.02%. North American sales decreased by 1.3%, as sales of morning foods, snacks, and "others" saw declines and only the specialty foods segment reported growth. Internationally, sales in Europe and Latin America grew 6.4% and 3.4% respectively, while sales in the Asian Pacific declined 9.6%. Overall, it was not a great quarter for Kellogg, but its stock has only fallen about 2.9% since. Today, it trades more than 11% below its 52-week high, so investors can consider it a value play and may want to buy for upside as well as its 3.04% yield. 

The Foolish bottom line
General Mills is one of the greatest companies in U.S. history and it has been a star in the stock market for more than 100 years. It is set to report second-quarter results on Wednesday and I believe the current estimates are very attainable. Keep a close eye on it and consider buying going into the report or on any weakness following the release.

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