CHICAGO – General Mills Inc. (GIS) Thursday reported a slight increase in quarterly profit that beat analysts expectations, as higher prices and strength in Yoplait yogurt and Progresso soup offset lower cereal sales and increased costs.
The second-biggest maker of breakfast cereal also said that increased promotional spending in stores has helped lift its cereal market share back to the level it reached before it raised prices. The company had lost share to top competitor Kellogg Co (K) after raising prices.
Net income for the fiscal second quarter that ended Nov. 27, was $370 million, or 97 cents per share, up from $367 million, or 92 cents per share, a year earlier.
"The quarter benefited from productivity initiatives, the continued turnaround in the foodservice division and improved volume from Big G cereals," Christopher Growe, an analyst at A.G. Edwards, said in a research note. He rates the stock a"buy," saying improved cereal and foodservice trends will help drive the stock higher.
Profit for the quarter included 5 cents of dilution associated with accounting for contingency convertible debt, equal to the dilution form a year earlier.
Excluding the dilution, earnings were $1.02 a share. Analysts had been expecting earnings of about 99 cents a share, according to Reuters Estimates.
Total sales rose 3 percent to $3.27 billion. Analysts had been expecting sales of $3.25 billion, according to Reuters Estimates. Volume, a measure that excludes currency and price fluctuations, rose 2 percent.
Yoplait sales rose 16 percent and meals division sales were up 9 percent, led by strength in Progresso.
Cereal sales fell 2 percent in the United States and Pillsbury USA sales fell 4 percent, the company said.
Volume was still down at its flagship "Big G" cereals for the fourth consecutive quarter, analysts noted, though the decline was only 1 percent, an improvement over previous quarters.
Bakery and foodservice sales were up 2 percent.
Last week General Mills boosted its 2006 earnings forecast and raised its quarterly dividend due to better-than-expected results in the first half of the fiscal year.
Shares of General Mills rose 57 cents, or 1.16 percent, to $49.92 in New York Stock Exchange trading.