I'll grant that General Mills
Unfortunately, growth still really isn't in the cards here. Sales were up all of 3% for the third quarter, segment operating profits were flat, and reported operating income was actually down more than 7%. And while the reported earnings growth of 17% per share looks good on the surface, the year-ago numbers were punished by some extraordinary items, and the underlying performance was actually down.
But it's not all bad news. Cash flow through the past nine months was up more than 35% on a free cash flow basis and more than 15% on a structural free cash flow basis. And that's what keeps me interested in this name -- a reasonably steady history of structural free cash flow growth that exceeds revenue growth.
I also think General Mills can do better on the cereal front. Some strategic miscalculations let Kellogg
I don't have any delusions that General Mills' stock is going to blow away the broader averages -- at least not unless something goes really wrong and investors flock to so-called "defensive" ideas. But I do believe that this company will continue to improve its return on invested capital and grow its cash flow, ultimately putting that cash flow to work in dividends and share buybacks. So, assuming you have room in your portfolio for a modestly undervalued yet consistent "safe" stock, General Mills might be worth a closer look.
For more Foolish food for thought:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).