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General Mills stock hits new high on earnings beat, rising dividend

Posted: 29 June 2022 6:16 pm

The company’s numbers shine despite high inflation and supply chain disruptions, boosting the stock’s appeal as a solid defensive pick. Here’s why it and similar stocks are worth a look.

Shares of General Mill (GIS) are rising Wednesday after the company reported strong-than-expected earnings and increased its quarterly dividend, boosting its investment appeal in a time when investors are looking for ways to protect their wealth in the face of soaring inflation.
The board declared a 6% increase in dividend to 54 cents per share, the company said in a press release, after announcing fourth-quarter fiscal 2022 financials that beat on both the top and bottom lines.
The stock climbed as much as 7% Wednesday to a new all-time high. It’s up nearly 11% year to date — about 20 percentage points better than the S&P 500. If investors are looking for an example of why consumer staples are worth a look as inflation-proof plays, this is it. And it’s just one of many stocks in that sector way ahead of the broader market in 2022.

General Mills beats on earnings and revenue, lifts dividend

General Mills reported an 8% growth in net sales to $4.9 billion in its fiscal 2022 fourth quarter, topping Wall Street consensus estimates of $4.8 billion, according to estimates published by MarketBeat.
“Fiscal 2022 was another successful year for General Mills, marking the fourth consecutive year that we’ve delivered results that met or exceeded our targets for top and bottom-line growth and cash generation,” said General Mills Chairman and CEO Jeff Harmening in a statement.
Adjusted earnings rose 23% in constant currency to $1.12 per share, beating analysts’ estimates that called for $1.01 per share.
The company reported $3 billion in sales for its North America retail segment — its largest business — an 11% increase over the same quarter last year. Its pet and North America food services segments grew 37% and 25%, respectively, year over year, while its international sales fell 21% to $749 million.
The company is forecasting a 4% to 5% increase in net sales for the full year fiscal 2023, or between $19.8 billion and $20 billion, which is about $500 million more than Wall Street’s high estimate, according to Yahoo Finance data. General Mills said it expects full-year fiscal 2023 adjusted earnings to come in flat to up 3% in constant currency from the base of
$3.94 earned in fiscal 2022. This puts its adjusted earnings between $3.94 and $4.06. Analysts were looking for adjusted earnings of between $3.79 and $4.16 per share.
“We plan to build on our strong momentum in fiscal 2023 by continuing to compete effectively, investing in our brands and capabilities, and reshaping our portfolio,” Harmening said.
As a part of its portfolio reshaping efforts in 2022, General Mills announced or closed seven transactions, including the acquisition of the Nudges, True Chews and Top Chews pet treats brands in North America, the divestiture of yogurt products in Europe and a series of divestitures of dough products in Europe and Israel. Meanwhile, the company closed its acquisition of TNT Crust in the first quarter of fiscal 2023 and plans to close its divestiture of its Helper brand of main meals and Suddenly Salad side dishes businesses in North America, also in the first quarter of fiscal 2023.
The company’s strong fourth quarter financials and 2023 outlook was enough for the company’s board to approve a 6% increase in its dividend, which it lifted to $0.54 from $0.51 per share. The company has paid dividends without interruption for 123 years.
Shares of General Mills reached a new all-time high of $74.99 Wednesday, even as the broader market continues to slump, demonstrating the value of stocks known for being inflation- and recession-resistant.

2022 winners in the consumer defensive sector

Companies engaged in the manufacturing of food, beverages, household and personal products, packaging, tobacco or alcohol are a part of the consumer defensive sector, a sector many investors turn to during recessionary or inflationary periods because they typically provide stable earnings and steady dividends.
There have been some great performers year to date in this sector. Here are some of the others, according to data from Finviz.

CompanyYear-to-date performanceIndustry
Molson Coors Beverage (TAP)+ 20%Beverages, Brewers
Hershey (HSY)+ 13%Food products
Campbell Soup (CPB)+ 10%Food products
Kellogg (K)+ 10%Food products
Dollar Tree (DLTR)+ 9%Retail
Philip Morris International (PM)+ 8%Tobacco
Kroger (KR)+ 7%Food & staples retailing
Coca-Cola (KO)+ 5%Beverages
Kraft Heinz (KHC)+ 5%Food products

Companies that consistently raise their dividend, especially stocks in defense sectors like consumer staples, can help hedge against inflation. General Mills stock is currently trading above its average target price and has a consensus rating of Hold. But until there are signs that inflation is easing, it could remain a solid stock for investors on the defensive.

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At the time of publication, Matt Miczulski did not own shares of any equity mentioned in this story.

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