The results are solid, particularly as the cereal specialist grapples with higher costs for products such as wheat and oil. First-quarter sales rose 7% to $3.07 billion, and earnings rose 9% to $0.81 a share. After last quarter's generally good results, management offered 2008 guidance of 7% to 8% yearly earnings growth, or earnings per share of $3.39 to $3.43. With the first quarter under its belt, the company reaffirmed the initial guidance.
A broad-based product portfolio can certainly be beneficial, as General Mills demonstrated this quarter. The company expanded margins in all of its business segments and invested in consumer marketing to build up each of its brands. By segment, U.S. retail sales were up 6%, while international sales saw a 19% rise. The bakeries and food-service segments dipped a little bit in sales growth, but only as a result of discontinued product lines. Excluding the discontinued products, the segment grew, albeit by a tepid 2%. However, a focus on existing products apparently paid off, because operating profit within the segment experienced double-digit growth.
Despite a challenging inflationary environment, General Mills seems to doing things right. It's continuing to grow its top line by volume growth, but it plans to be more aggressive this year with its pricing mix. Management, meanwhile, is carefully monitoring the costs of certain inputs and will have to adjust, based on future cost of goods sold, how much of its increased costs it passes on to customers.
Obviously, if you're looking for Rule Breaking growth, this is not the place to invest. However, with its solid brand names and consistent growth, General Mills may belong in some portfolios that prefer less volatile companies. The company has raised its dividend two times since February for a current yield of 2.7%, which is a competitive rate compared with rivals such as Kellogg
General Mills offers value to shareholders through both dividends and buybacks, and its ability to produce robust sales growth even in a difficult environment might make this company a lucky charm for some Fools to place their money.
Fool contributor Larry Rothman is happy to receive feedback, and he promises to read it when he's not being wrestled by his three children. Feel free to email him at firstname.lastname@example.org. He doesn't have any positions in the companies mentioned. The Fool has a disclosure policy.