General Mills Raises Dividend After 1Q Sales Beat

General Mills posted better-than-expected 1Q results as the food company benefited from increased at-home demand during the COVID-19 pandemic. The cereal company reported 1Q adjusted EPS of $1 per share, beating analysts’ estimates of $0.87. Revenues during the quarter ending Aug. 30 increased 9% year-over-year to $4.4 billion, exceeding analysts’ estimates of $4.2 billion.

Shares rose more than 3% in Wednesday’s pre-market trading but are down 0.2% in morning trading with the rest of the US stock market.

General Mills’ (GIS) said sales rose due to strong demand for at-home food demand, positive net price realization and product mix. Adjusted earnings in 1Q rose 27% in constant currency, supported by higher adjusted operating profits. In addition, General Mills raised its quarterly dividend by 4% to $0.51 per share. The dividend will be payable on Nov. 2 to shareholders of record as of Oct. 9.

General Mills did not give an outlook for fiscal 2021, but continues to expect that “its fiscal 2021 performance will be the relative balance of at-home versus away-from-home consumer food demand, driven by the COVID-19 pandemic and resulting global macroeconomic headwinds”. For 2Q, the company expects high single-digit retail sales growth in General Mills’ North America retail categories. (See GIS stock analysis on TipRanks).

On August 29, Citigroup analyst Wendy Nicholson initiated coverage on the stock with a Hold rating and a price target of $70 (20.7% upside potential). Nicholson noted that the company’s premium pet food, especially its Blue Buffalo brand, benefited from strong e-commerce sales amid the pandemic. The analyst added that the company “has also gained market share in several of its core categories owing to superior execution throughout the pandemic.” However, he believes that the stock’s run in recent months is largely reflected in the strong performance.

Currently, the Street has a cautiously optimistic outlook on General Mills. The Moderate Buy analyst consensus is based on 2 Buys and 6 Holds. The $66.63 average price target implies upside potential of 14.9% to current levels. Shares are up 10% year-to-date.