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Will General Mills (GIS) Keep Gaining on High Demand in 2021?

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General Mills, Inc. (GIS - Free Report) is benefiting from its focus on key priorities and innovations. Also, the company’s robust cost-saving efforts are yielding. Apart from these, it is witnessing rising demand owing to higher at-home consumption amid the coronavirus outbreak.

Such upsides have helped General Mills’ shares to gain 10.4% year to date compared with the industry’s growth of 1.9%. Let’s discuss the factors that are likely to keep the company in good shape for 2021.

Burgeoning Demand & Impressive Outlook

Burgeoning demand amid coronavirus pandemic bolstered General Mills’ second-quarter fiscal 2021 results with the top and the bottom line advancing year over year as well as beating the Zacks Consensus Estimate. Notably, adjusted earnings per share of $1.06 increased 9% on a constant-currency basis. Net sales of $4,719.4 million advanced 7% in the quarter. Organic sales also increased 7% on the back of broad-based market share gains amid increased at-home food demand.

Moreover, management anticipates consumer demand for food at home to remain high compared with pre-pandemic levels for the rest of fiscal 2021. General Mills envisions solid top-and bottom-line growth in the third quarter of fiscal 2021. The company expects third-quarter organic net sales growth to be in line with second-quarter levels.

 

Other Factors Driving General Mills’ Performance

General Mills is on track with its three core priorities for fiscal 2021, which include competing efficiently, boosting efficiency to fuel investments and reducing leverage. With regard to its competing-efficiently priority, the company boosted broad-based market share gains that include holding or growing market share in five out of its six largest markets in the first half of fiscal 2021. As part of boosting efficiency, the company is on track with its Holistic Margin Management and Strategic Revenue Management initiatives. Finally, General Mills progressed well with reducing its debt leverage in the second quarter of fiscal 2021. In fact, a strong balance sheet position encouraged the company to reinstate its dividend growth, while increasing its flexibility to undertake potential M&A activities or share buybacks.

Additionally, General Mills is focused on consumer-friendly innovations to drive growth. In fact, management is impressed with its innovation performance in fiscal 2021. Incidentally, the company successfully completed the launch of various products like Cinnamon Cheerios, convenient new Progresso Toppers and Nature Valley Packed sustained energy bars during the first half of fiscal 2021. Moreover, management is optimistic about its innovation line up for the second half of fiscal 2021.

Apart from these, General Mills is pursuing many initiatives that are focused on improving operational efficiency to generate cost savings and support key growth strategies. In this regard, cost savings through increased efficiency, reduced complexity through SKU optimization, further supply chain optimization and continued expansion of zero-based budgeting across the business bodes well.

Wrapping Up

Lower demand for away-from-home food amid the coronavirus outbreak is hurting the company’s Convenience Stores & Foodservice. Reduced consumer traffic and other pandemic-induced restrictions adversely impacted the segment’s major away-from-home channels like restaurants, schools, lodging and convenience stores in fiscal second quarter. Apart from these, General Mills is battling challenges stemming from escalated costs.

Nevertheless, we believe that the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay afloat amid such hurdles and remain on growth trajectory going into 2021.

Better-Ranked Food Stocks

The Hain Celestial (HAIN - Free Report) , with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 24.6%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

B&G Foods, Inc. (BGS - Free Report) , with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 9.3%, on average.

Sysco Corporation (SYY - Free Report) , with a Zacks Rank #2, has a long-term earnings growth rate of 11%.

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