With bang-up quarterly results pinned to its chest, General Mills
It may look disappointing that revenue for first-quarter fiscal 2010 rose only 1% to $3.52 billion. But the results fill out when we consider that net sales in the year-ago period shot up 14%, making for a difficult comparison. The U.S. retail segment -- the company's largest division, and a standout performer this quarter -- enjoyed a sales gain of 6%, driven by increased consumer demand. The Pillsbury line posted particularly strong sales growth, followed by Big G cereals and Yoplait yogurt products. Also, management cited strong relationships with its retail partners, including its largest customer, Wal-Mart Stores
Earnings per share, meanwhile, came in at $1.25, up a whopping 58% and exceeding management's expectations. Excluding the effects of adjustments in the recently completed and year-ago periods, EPS rose a still-impressive 33%.
As previously mentioned, lower commodity costs -- the same trend that's buffeting U.S. farmers and fertilizer names PotashCorp
The quarter did have some soggy spots, though. The company's organics business, which includes the Cascadian Farm and Muir Glen brands, saw sales fall 5%. With private-label and store brands muscling in on the organic front, the drop-off is unsurprising. Still, if Whole Foods'
Ultimately, I'm not that worried. General Mills has a number of recent product innovations to provide momentum, including a low-calorie probiotic yogurt, which will likely go head-to-head with Danone's DanActive yogurt. Plus, the earnings beat is allowing management to plow additional cash into an already bulked-up marketing program.
As for the remainder of the year, management pegged revised EPS guidance at $4.40 to $4.45 (excluding any adjustments), up from the earlier expectation of $4.20 to $4.25. Based on a $63 share price, that puts the current fiscal year P/E at roughly 14.3 -- tasty eating, I'd say.