This Is Why You Should Buy General Mills
General Mills (NYSE:GIS) has a few things going for it that make it a Buy before it reports earnings later this week. Among them are its positioning as a safe-haven consumer staples brand, its outlook for revenue, the value, and the dividend. The recent pull-back in prices is cause for concern but, in today's environment, it should be viewed as a buying opportunity for income investors.
General Mills Will See Growth
The analysts are bullish on General Mills growth outlook for the fiscal first quarter of 2021, the calendar 3rd, but a little less so for the year. Revenue is projected to grow by 10% in the quarter but fall about -2.0% for the year. The mitigating factors are last years of explosive growth, General Mills’ tendency to beat consensus and the longer-term outlook.
Regarding last year’s growth, the company saw revenue surge by 20% in the 4th quarter, 5.0% for the year, due to the uptick in stay-at-home demand, and that is a tough comp to beat. Even so, General Mills tends to beat consensus most of the time so the question really is how much will it beat consensus by? The trends point to solid activity if not growth for this quarter and the foreseeable future so I expect to see good things in the report. Longer-term, revenue is projected to grow again from F21 to F22 and incrementally thereafter.
General Mills Is A Good Dividend Payer
General Mills is a high-quality dividend payer yielding over 3.0% with shares trading near $58. That’s about double the average S&P 500 company and more than twice as safe. The company carries some debt but not too much leaving the balance sheet in great shape. The company is well-capitalized with ample coverage and plenty of free-cash-flow. Looking at the history, General Mills hasn’t increased its distribution for the last two years but it is a dividend grower on-balance. There have been 28 periodic increases since the distribution was started in 1990 and the company is on track to continue that trend. Even if General Mills doesn’t increase the payout the yield is enough to keep me interested.
General Mills Is A Value Any Way You Look At It
Value is something I have been urging investors to buy for the second half and General Mills is a value. The company trades at roughly 16X its forward earnings which makes it a value relative to the broader S&P 500 (NYSEARCA:SPY) and the Consumer Staples sector (NYSEARCA:XLY). The S&P 500 is trading about 21.7X its forward earnings and the most highly-valued staples stocks are much higher than that. Hormel (NYSE:HRL) and Clorox (NYSE:CLX), the most highly-valued of the staples stocks, are both trading near 28X their earnings. There are other, deeper, values in the staples sector like Kraft-Heinz (NASDAQ:KHC) but it just surprise investors with some restructuring news that has shares in near free-fall.
The Technical Outlook: General Mills Is Deeply Oversold
Shares of General Mills have been in correction mode along with the broader market and, like the broader market, beginning to show signs of bottoming. The stock is bouncing off of a support level that is coincident with price action in February and March so it could be a strong bottom. The indicators are still a little mixed but show a couple of noteworthy signals including 1) stochastic is oversold at support 2) stochastic is showing a strong buy signal and 3) bearish momentum has peaked and very close to reversising. A strong report on Thursday could be the trigger to get the bulls running again.
Featured Article: What is FinTech?7 Penny Stocks That Don’t Care About Robinhood
By the time you read this Vladimir Tenev, the CEO of the trading app Robinhood, will be testifying in front of Congress. The company’s role in the GameStop (NYSE:GME) short squeeze will be called into question.
However, the real issue at stake is the right of traders to buy and sell the equities of their choice. In the case of Robinhood, some traders are buying a lot of penny stocks. While definitions vary, penny stocks are generally considered stocks that are trading for less than $10 per share. These stocks are largely ignored by the investment community.
One reason is that many of these stocks are cheap for a reason. For example, the company may have a business model that is out of date. In other cases, they operate in a very small, niche market that doesn’t drive a lot of revenue.
And most of these stocks are ignored by the investment community. They simply aren’t considered significant enough to spend time debating.
But some penny stocks do have the attention of Wall Street. And they’re being largely ignored by the day trading community. The focus of this special presentation is to direct you to penny stocks that have a story that the “smart money” thinks will eventually be trading at much higher prices.
And that’s why you should be looking at them now.
View the "7 Penny Stocks That Don’t Care About Robinhood"
Companies Mentioned in This Article
Compare These Stocks
Add These Stocks to My Watchlist