General Mills Stock Is Rising Because the Demand for Groceries Will Continue -- Barrons.com
By Al Root
General Mills stock was rising Tuesday on updated financial guidance. The trend toward eating at home is boosting the company's results.
The initial surge in grocery sales won't last forever, but the company thinks more people will eat more at home for foreseeable future. And that is good for General Mills stock (ticker: GIS).
General Mills experienced unprecedented demand for food at home in April amid pandemic lockdown mandates. The company's food-service and convenience-store business, however, took a hit. Overall, the company said sales in its current quarter will increase at a double-digit rate. That is much faster than in recent quarters.
Wall Street, however, is already there. Current estimates predict sales will rise 17% in the quarter. And quarterly sales estimates are up about 5% over the past month. Analysts expect the company to earn about $1.03 in per share earnings this quarter, up from about 96 cents a month ago.
Covid-19 and its impact on stock prices hasn't been easy to predict. In this case, everyone seems to have known what was coming, and General Mills stock has been moving higher. Tuesday morning, the stock was up 2.3% even as the broader market moved lower. Year to date, shares are up about 16%, compared with drops for the Dow Jones Industrial Average and S&P 500.
Overall, food and beverage stocks in the S&P 500 are down 11% year to date. Performance in the group is bifurcated. Some stocks, such as Molson Coors Beverage (TAP) are down because a lot of product, in this case beer, is consumed away from home. Molson shares are down almost 29% year to date.
"During this difficult and unprecedented situation, I am incredibly proud of the way General Mills has stepped up to ensure a reliable food supply for our consumers and our communities," CEO Jeff Harmening said in the company's news release. General Mills, for its part, hasn't experienced any Covid-19 related outages since coronavirus cases began growing rapidly in the U.S.
General Mills fiscal year ends this month, so it updated investors about the current quarter, which will be the company's fiscal fourth quarter. Companies often will update investors before reporting numbers if things are much better, or much worse, than expected.
Companies will also update investors ahead of events. General Mills is giving a presentation at the BMO Farm to Market investor conference on Wednesday afternoon -- another chance for investors to hear from management about the state of the company and the state of the industry.