Cereal Maker Sets Weak Forecast (GIS, KFT, K, POST, RAH)

General Mills Inc. (NYSE: GIS) reported fourth quarter and full fiscal year earnings this morning, posting mixed results and offering an outlook for the 2013 fiscal year that came in below consensus estimates. For the quarter, General Mills posted EPS of $0.60, a penny better than the consensus estimate, on revenue of $4.1 billion, essentially in line with the estimate. For the 2012 fiscal year, adjusted EPS totaled $2.56, beating estimates by $0.02, and revenues totaled $16.7 billion, slightly better than the estimate of $16.68 billion.

The company’s results were not materially different from results posted by competitors Kraft Foods Inc. (NASDAQ: KFT) and Kellogg Co. (NYSE: K), while better than Post Holdings Inc. (NYSE: POST), a recent spin-off from Ralcorp Holdings Inc. (NYSE: RAH). General Mills attributed 12% of revenue growth to its acquisition of Yoplait and noted that foreign exchange rates did not have a material effect on sales in 2012.

Where General Mills struggled was with high commodities prices and budget-conscious consumers:

Fiscal 2012 was characterized by the highest input-cost inflation we’ve experienced in more than three decades, and this cost pressure constrained our earnings growth. In addition, slow economic recovery kept many consumer budgets under pressure.

For the current fiscal year, the company expects cost inflation of 2%-3%, and projects 2013 adjusted EPS of $2.65, well below the prior consensus expectation of $2.75.

Shares closed yesterday at $38.15 in a 52-week range of $34.64-$41.06. The stock is inactive in pre-market trading this morning.

Paul Ausick

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