General Mills (NYSE:GIS) and Kellogg (NYSE:K) are two of the largest packaged-goods manufacturers in the world and both have recently released their quarterly reports. Analysts had expected stronger results from both of them, but the stocks have shown strength with rises after the releases anyway. Let's break down the quarters to determine which company performed better and which could provide the highest returns for investors going forward.

The quarterly results


General Mills released its third-quarter report for fiscal 2014 on March 19. Here's a breakdown and a year-over-year comparison of the results:

Earnings Per Share $0.62 $0.68
Revenue $4.38 billion $4.46 billion

Source: Benzinga.

  • Earnings per share decreased 6.1%
  • Revenue decreased 1.2%
  • U.S. retail sales declined 1.7%
  • Convenience store and foodservice sales fell 7.1%
  • International sales:
    • Latin America: 17% increase
    • Asian Pacific: 14% increase
    • Canada & Europe: 2% increase
  • Operating profit increased 4.4% to $670.6 million
  • In the first nine months of fiscal 2014, General Mills has repurchased approximately $1.40 billion of its shares.

Source: Kellogg.

On Feb. 6, Kellogg released its fourth-quarter report to complete fiscal 2013. Here's an overview and a year-over-year comparison of the results:

Earnings Per Share $0.83 $0.82
Revenue $3.50 billion $3.52 billion

Source: Benzinga.

  • Earnings per share increased 18.6%
  • Revenue decreased 1.7%
  • North American sales declined 2.8%
  • International sales:
    • Latin America: 3% increase
    • Asian Pacific: 4.2% increase
    • Europe: 1.2% increase
  • Operating profit increased 8.8% to $1.26 billion
  • Kellogg repurchased approximately $544 million of its shares during fiscal 2013.

General Mills Headquarters. Source: General Mills Media.

What will the future hold?
In its report, General Mills reaffirmed its guidance for the full year as it shrugged off the sluggish third quarter and remained confident on the fourth quarter. The company still expects earnings per share of $2.87-$2.90, and this would result in growth of 6.7%-7.8% from fiscal 2013.

The company expects a lower quarterly tax rate and a lower average number of shares outstanding during the upcoming quarter, and these will help it reach its goals. It would be impressive if General Mills can satisfy these expectations, but it does appear that the growth will see lots of help from share repurchases instead of what we would really like to see: higher sales.

Kellogg's Headquarters. Source: Wikimedia Commons.

In Kellogg's fourth-quarter report, the company provided its outlook on fiscal 2014; it expects to accomplish these results:

  • Earnings per share growth of 1%-3%
  • Revenue growth of 1%
  • Operating profit growth of 0%-2%
  • Cash flow in the range of $1.0 billion-$1.1 billion.
The company has provided absolutely dismal guidance that shows that Kellogg expects the industry's struggles to continue in the year ahead; this may also signify things to come when General Mills provides its outlook on fiscal 2015 in its fourth-quarter report. The 1%-3% earnings growth might only come as a result of share repurchases, so investors must keep that in mind if the stock shows weakness in the months ahead.

And the winner is...
After reviewing the earnings results and outlooks going forward, General Mills wins this matchup. While it was a difficult decision, General Mills showed much better growth internationally and it has been repurchasing its shares at a higher rate than that of Kellogg. Also, Kellogg gave an extremely weak outlook on fiscal 2014 and I believe General Mills' product mix offers the company more room for a bullish view going forward.

With this said, I would not recommend initiating a position in General Mills today; the only true positive for the stock right now is its 3.2% dividend and I do not think this provides reason enough to justify an investment in it today. Foolish investors should watch it closely, though, and consider buying it on any significant pullback provided by the market. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.