GENERAL MILLS INC. $40 (New York symbol GIS, Conservative Growth Portfolio, Consumer sector; Shares outstanding: 645.2 million; Market cap: $25.8 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.generalmills.com) is one of the world’s largest food makers. Its top brands include Big G (cereal), Green Giant (canned and frozen vegetables), Pillsbury (baking dough), Old El Paso (tacos) and Progresso (soups and sauces).
In General Mills’ fiscal 2013 first quarter, which ended August 26, 2012, its sales rose 5.3%, to $4.05 billion from $3.8 billion a year earlier. Most of this gain is due to the company’s July 2011 purchase of a 51% stake in the private company that makes Yoplait yogurt; General Mills has made Yoplait products under license in the U.S. since 1977. The company also recently paid $940 million for a privately held maker of snacks and convenience meals in Brazil.
The extra sales from these new businesses helped offset the negative impact of foreign exchange rates; overseas markets supplied 27% of its total sales. As well, General Mills lowered some of its prices to compete with low-cost generic brands.
Earnings rose 2.1%, to $438.3 million from $429.4 million. Earnings per share rose 3.1%, to $0.66 from $0.64, on fewer shares outstanding. These figures exclude a number of unusual items, such as costs to integrate its new operations and gains and losses on hedging contracts that General Mills uses to lock in prices of certain ingredients.
The company’s strong balance sheet gives it plenty of room to make more acquisitions. It ended the quarter with $5.5 billion of long-term debt, or just 21% of its market cap. It also held cash of $1.5 billion, or $2.34 a share.
General Mills will probably earn $2.67 a share in its current fiscal year. The stock trades at 15.0 times that figure. The $1.32 dividend yields 3.3%.
General Mills is a buy.
