General Mills, the maker of Wheaties, Cheerios and other packaged foods, is set to report earnings for the May-ended fourth fiscal quarter before the market opens Wednesday.
Stubbornly high inflation and increased prices have pressured American households to load their shopping carts with generic items instead of favorite brands. Analysts polled by FactSet expect General Mills’ sales to decline 3.6% to $4.85 billion from a year ago, while earnings per share are seen at 99 cents, down 11.6%.
“We see a generally muted quarter for General Mills as management commentary and consumption data point to soft trends,” wrote RBC Capital Markets analyst Nik Modi in a note last week. He has a Sector Perform rating on General Mills stock with a $70 target price.
General Mills’ previous quarterly earnings report was strong. Price increases contributed two percentage points to the firm’s sales growth, but it was largely offset by lower transaction volume compared with a year ago.
Management had noted that sales volume and price mix could both be negative in the fourth quarter, according to RBC’s Modi. The company expects earnings for fiscal 2024 to increase 4% to 5%, but also for sales to remain flat or decline as much as 1%.
General Mills shares have tumbled 17% over the past 12 months. Wall Street isn’t upbeat: Four-fifths of analysts rate the stock at Hold, according to FactSet, with an average target price close to the current level.
The company has invested heavily to fortify its brands. General Mills advertising expenses increased 41% to fiscal 2023 from fiscal 2018. In the first half of fiscal 2024, it was up by high single-digit percent from a year ago.
“We’d like to get back to a position of growth as a company, and we’re going to continue to invest to do that,” CEO Jeff Harmening said during the latest conference call.