What's Next For General Mills After Encouraging Q2? The Street Debates

General Mills, Inc. GIS reported Wednesday its fiscal second-quarter earnings print, which impressed investors as management reaffirmed the cereal maker's 2019 outlook.

Here is a summary of how three of the Street's top analysts reacted to the print.

Bank Of America: Cleared A 'Low Bar'

General Mills' print came in better than feared although it was up against a "low bar," BofA's Bryan Spillane said in a note. The company showed a beat on the margins line even though total sales fell short of consensus estimates.

Management reaffirmed its full year 2019 outlook and the math behind the guidance implies a ramp in sales and profit growth in the back half of the fiscal year, the analyst said. To achieve its goals, management remains focused on three key aspects, including growing the core business through innovation and price/mix shifts, growing Blue Buffalo's sales and better controls over revenue, margin management and working capital.

The research firm's unchanged $45 price target is based on 15 times 2019 EPS estimate of $3.05. A neutral stance on the stock is based on improving sales prospects but countered by industry challenges which General Mills is taking steps to address.

Bernstein: Positives And Negatives

General Mills' report is highlighted by a positive price and mix performance and a margin beat but at the expense of volume declines, Bernstein's Alexia Howard said. Specifically, total sales of $4.41 billion was 2.2 percent below expectations and organic sales growth fell 1 percent from a year ago and total volume declined by 3 percent.

On the other hand, adjusted gross margin of 34.5 percent was 96 basis points better than expected, North America Retail segment pricing was 1 percent higher and EBIT rose 8 percent year-over-year to $765 million.

Citi: Significant Value In Stock

The earnings beat should give investors confidence the company is on track to at least match 2019 EPS estimates which seem "low," Citi's David Driscoll said. In fact, after two straight quarters of earnings beats, the stock offers investors "significant value" at a time when it is trading near a 15-year low on valuation metrics.

Price Action

Shares of General Mills were trading at $38.84 Thursday afternoon.

Related Links:

A Breakdown Of The General Mills Q2 Print

After 26% Dip, General Mills Finds A Sell-Side Friend In Susquehanna

Photo credit: Sarah Mahala Photography, Flickr