Hot stock to watch: General Mills, Inc. (NYSE: GIS)

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General Mills, Inc. (NYSE: GIS) stock fell 1.98% on July 1st, 2020 (Source: Google finance) but recovered over 0.3% in the pre-market session (Source: Google finance) as the company posted better than expected results for the fourth quarter of FY 20 driven by strong demand for at-home food during the coronavirus pandemic. The company anticipates further boost to sales of its cereals and snacks for the rest of the year due to COVID-19 pandemic. The company posted net income of $625.7 million in the fourth quarter to May 31, up from $570.2 million, in the year-earlier period. At-home food forms for approximately 85% of its pre-pandemic net sales and away-from-home food accounted for 15%. At-home demand in North America led to higher sales of meals, baking ingredients and cereal, which was less elevated in Europe and Australia. The pet segment benefited from stocking up, which partially unwound at the end of the fourth quarter. The company has not provided the guidance because of the uncertainty caused by the pandemic, but intends to work to reduce leverage. GIS anticipates the demand in 2021 may get affected due to changes in the buying habits of people even as North America retail business, which is its biggest unit, posted a 36% rise in quarterly sales.

GIS in the fourth quarter of FY 20 has reported the adjusted earnings per share of $1.10, beating the analysts’ estimates for the adjusted earnings per share of $1.06, according to the FactSet consensus. The company had reported the adjusted revenue growth of 21 percent to $5.023 billion in the fourth quarter of FY 20, beating the analysts’ estimates for revenue of $4.985 billion. Organic net sales rose 16% in the fourth quarter. The adjusted operating profit grew 24% in constant currency, mainly due to higher net sales, which is partly offset by higher SG&A expenses, including a 39% increase in media investment. There was 12% growth in organic pound volume and 3 points of favorable organic price mix.

Moreover, the company’s fourth quarter adjusted gross margin expanded 80 basis points, due to favorable price mix, including growth from higher margin North America Retail and Pet segments, and strong HMM savings more than offsetting COGS inflation, partially offset by increased supply chain costs related to COVID-19.

Additionally, the company generated full-year operating cash flow of total $3.7 billion, up 31% from the prior year. The company did capital investments for fiscal ’20 of total $461 million. The company has generated full-year free cash flow of total $3.2 billion, which is up 42% from a year ago.

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