General Mills Inc posted a lower-than-expected quarterly profit on Wednesday, hurt by the effect of the stronger dollar and high costs, and forecast disappointing full-year earnings, sending its shares down as much as 10 percent to a three-year low. The food makers executives briefly touched on its fiscal 2010 outlook during a conference call, saying it "would look to be ahead" of the $4.05 a share earnings goal set earlier.
But no specific details were offered, adding to investors fears that 2010 profit may fall short of analysts expectations of $4.25 per share, according to Reuters Estimates. "Clearly, thats going to be below where everyone is at," said Edward Jones analyst Jack Russo, adding that the vague outlook was partly a reason for General Mills stock decline.
Investors were also punishing it for the disappointing quarterly results, even though the reasons - a stronger dollar, high commodity costs and weak sales in its food service unit - were not a big surprise, Russo said. "But thats what you have right now in the market. If you miss, you pay for it dearly," he added. Earnings in the third quarter that ended February 22 fell to $288.9 million, or 85 cents a share, from $430.1 million or $1.23 a share, a year earlier.
Its profit was 79 cents a share, excluding one-time items like changes in the market value of some commodity hedges, a gain from insurance settlement and tax expense. Analysts on average were expecting 87 cents on that basis, which would have been flat with a year earlier, according to Reuters Estimates.
Sales for the maker of Progresso soup, Cheerios cereal and Yoplait yogurt rose 4 percent to $3.54 billion, benefiting as consumers ate more meals at home to save money. Sales rose 5 percent in the US retail segments meals unit, which sells Green Giant frozen vegetables and Helper dinner mixes while Pillsbury division sales were up 15 percent, helped by demand for frozen appetizers and refrigerated dough items.
Sales fell 6 percent in its bakeries and food service segment, which caters to restaurants and convenience stores. "The trend of consumers eating more meals at home is challenging for this division," Chief Executive Ken Powell said in a conference call.