General Mills continues to experience inflation on the cost front. But that didn't stop the consumer-foods giant from earning more than expected and raising its financial forecasts for the full year.
General Mills (ticker: GIS) reported fiscal adjusted third-quarter earnings of 84 cents a share, above the 78 cents expected by analysts, according to FactSet. Revenue of $4.5 billion matched analysts' estimates and year-ago results.
Shares rose 3.6% to $64.96 in morning trading Wednesday.
General Mills said it expects to continue to feel the impact of inflation and supply-chain disruptions. Still, the maker of Cheerios expects full-year organic net sales to increase approximately 5%, slightly more than the prior estimate of 4% to 5%. Adjusted operating profits are expected to be flat to down 2%, better than the 4% to 1% decline previously expected.
Though the company acknowledges the volatile environment, CEO Jeff Harmening said: "We expect to drive strong growth in the fourth quarter, fueled by accelerating net price realization. With confidence in our plans and positive momentum on our business, we're raising our guidance for fiscal 2022."
Analyst Nik Modi from RBC Capital Markets said General Mills received a welcome boost from consumers stocking up their pantries due to the pandemic. "While consumption trends will likely remain elevated for the foreseeable future, we believe that is already discounted in the stock," he said in a note.
Modi rates the stock at Sector Perform with a $66 price target. He said it may be possible to be more positive about the shares once the company works its way through a series of changes to its portfolio of businesses, which Modi said is likely to continue in 2022. "We expect this bevy of changes to create some noise in the numbers," he said.
General Mills recently acquired Tyson's pet treats business and divested its European Yoplait operation. The pet-treats deal benefited sales growth by 14%, while the European yogurt divestiture lowered International sales by 20%, Stifel analyst Christopher Growe said in a note.
Growe believes "any further improvement in sales growth trends could continue to push the shares higher from this level." He maintained a Hold rating on the stock with a target of $64 for the price.