Will High Input Costs Mar General Mills' (GIS) Q2 Earnings?

General Mills, Inc. (NYSE:GIS) is scheduled to release second-quarter fiscal 2019 results on Dec 19. This global manufacturer and marketer of branded consumer foods delivered an average positive earnings surprise of 4.8% in the trailing four quarters, registering a beat in two of them and in-line results in the rest. That said, let’s take a look at some of the factors that are likely to impact the company’s upcoming results.

Strategies to Boost Sales Bodes Well

General Mills’ strategy to ensure business growth includes efforts such as innovations, efficient customer marketing and strong in-store execution to sharpen competitive edge. Further, the company is striving to drive growth across four main platforms like Haagen-Dazs ice cream, snack bars, Old El Paso Mexican food as well as General Mills’ natural and organic food brands.

Moreover, as part of the Consumer First strategy, General Mills focuses on customer-centric innovations to enhance sales. In this respect, the company is accelerating natural and organic products portfolio. Markedly, the company has an outstanding portfolio of growth products and brands, especially in the healthy and convenience packages. Also, the company expects to reap consistent benefits from Annie’s as well as General Mills’ biggest natural and organic brand. Apart from these, the company is working toward reshaping its portfolio via prudent buyouts and divestitures.

We expect such initiatives to boost the top line in the second quarter. The Zacks Consensus Estimate for sales is pegged at $4,510 million, up almost 7% from the year-ago quarter’s figure.

General Mills, Inc. Price, Consensus and EPS Surprise

General Mills, Inc. Price, Consensus and EPS Surprise | General Mills, Inc. Quote

Input Cost Likely to be a Drag

While General Mills' sales are likely to receive a boost from the aforementioned factors, the company’s earnings picture looks somewhat troubled, thanks to input cost inflation. Well, rising input costs are hurdles to other food companies like Campbell Soup (NYSE:CPB) , Conagra Brands (NYSE:CAG) and TreeHouse Foods (NYSE:THS) among others. General Mills expects rising input costs to persistent as headwinds in the forthcoming periods.

In spite of management’s efforts to boost savings, they are less likely to offset the negative impacts of rising costs. This makes us cautious about the upcoming earnings announcement. Incidentally, the consensus mark for earnings has declined by a penny in the past 30 days to 81 cents, reflecting a decline of 1.2% from the year-ago quarter’s figure.

What Does the Zacks Model Unveil?

Our proven model doesn’t show that General Mills is likely to beat bottom-line estimates in the to-be-reported quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though General Mills carries a Zacks Rank #3, its Earnings ESP of -4.76% makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

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