Investing

Earnings Previews: General Mills, Heico

Paul Ausick

Published: December 16, 2022 11:03 am

Friday’s early premarket activity had all three major indexes trading lower. We also noted a few stocks making big moves in the early-bird session.

All three major indexes opened regular Friday trading down slightly. At around 10:00 a.m., the Dow Jones industrials traded down 0.48%, the S&P 500 was down 0.49, and the Nasdaq had retreated by 0.07%.

After U.S. markets closed Thursday, Adobe reported better-than-expected adjusted earnings per share (EPS) while narrowly missing the consensus revenue estimate. The company guided February-quarter EPS above consensus and revenue in a range of $4.60 billion to $4.64 billion, compared to a consensus estimate of $4.64 billion. Adobe also reaffirmed its fiscal 2023 guidance. Shares traded up 5.2% Friday morning.

Before markets opened on Friday, Accenture beat estimates on both the top and bottom lines and issued current quarter guidance in line with consensus estimates. The firm also raised its EPS guidance range and its revenue guidance. Shares traded down about 4.7%.

Darden Restaurants also beat top-line and bottom-line estimates and raised guidance. Shares traded down 4.5%.

Here is a preview of two companies set to report results after markets close Monday or first thing Tuesday morning.

General Mills

Shares of food products giant General Mills Inc. (NYSE: GIS) have added more than 29% over the past 12 months, including three corrections in March, May and October that slowed the stock’s rise somewhat, but not enough to stop it from posting a new 52-week high earlier this month. The company’s performance far outstrips the 3.8% gain over the past year for the packaged foods industry.

General Mills is in the process of eliminating hundreds of jobs in a program begun last year that is expected to end in May. Look for the company to report fiscal second-quarter results early Tuesday.

Sentiment on the stock remains muted. Of 20 analysts covering the shares, 15 have a Hold rating and only two rate the stock at Buy or Strong Buy. Shares traded above the median price target of $80.00. At the high target of $95.00, the implied upside is 10.1%.

Second-quarter revenue is forecast at $5.19 billion, which would be up 10.1% sequentially and 3.4% higher year over year. Adjusted EPS are forecast at $1.06, down 4.7% sequentially but up 7.1% year over year. The current estimates for the 2023 fiscal year ending in May call for EPS of $4.11, up 4.3%, on sales of $19.59 billion, up about 3.1%.

General Mills stock trades at 21.0 times expected 2023 EPS, 19.8 times estimated 2024 earnings of $4.35 and 18.7 times estimated 2025 earnings of $6.05 per share. The stock’s 52-week trading range is $61.67 to $88.343. General Mills pays an annual dividend of $2.16 (yield of 2.48%). Total shareholder return for the past year was about 32%.

Heico

Shares of Heico Corp. (NYSE: HEI), a parts supplier to the aerospace and defense industries, have added 8.5% over the past 12 months, including a gain of more than 14% in the past six months. Heico is expected to post quarterly results later on Monday.

BlackRock is the largest shareholder in Heico, with just under 10% ownership. Cathie Wood’s ARKX ETF owns a stake of around 1.3% in the company. In July, the company agreed to acquire France-based Exxelia for around $463.1 million, its largest acquisition ever, adding a maker of premium, high-reliability components for the industries Heico already serves, along with Exxelia’s 3,000+ global customers. The acquisition is expected to close in the first quarter of 2023.

Analyst sentiment is mostly positive on the stock. Of 14 brokerages covering the shares, nine have a Buy or Strong Buy rating and five more rate the shares at Hold. At a share price of around $153.00, the upside potential based on a median price target of $172.00 is about 12.4%. At the high target of $186.00, the upside potential is 21.6%.

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For the company’s fiscal fourth quarter that ended in October, analysts expect revenue of $603.9 million, up 6% sequentially and 18.5% higher year over year. Adjusted EPS are forecast at $0.69, up 15.3% sequentially and by 11.3% year over year. For the full fiscal year, the estimates call for EPS of $2.54, up 15.1%, on sales of $2.2 billion, up 18%.

Heico stock trades at 52.2 times expected 2022 EPS, 43.6 times estimated 2023 earnings of $3.05 and 39.1 times estimated 2024 earnings of $3.39 per share. The stock’s 52-week range is $126.95 to $165.79, and Heico pays an annual dividend of $0.18 (yield of 0.11%).