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General Mills: A delicious earnings surprise
Conservative stock selections are always in order, provided they show signs of support and upside potential. There is one showing up on today's radar that exhibits both characteristics and involves that most conservative of commodities, food.
General Mills (NYSE:GIS) is one of the largest food companies in the world. It offers more than 100 consumer brands that span the culinary spectrum from Pillsbury to Green Giant, Old El Paso, Cheerios, Yoplait, Betty Crocker and Hamburger Helper. The company operates in North America, Latin America, Europe and the Asia/Pacific region.
The firm surprised investors late last month, when it announced Q2 EPS of $1.08 per share and revenues of $3.47 billion.
Analysts had been expecting $1.03 and $3.42 billion. Management also
raised FY07 EPS guidance to $3.09-$3.13, from the $3.03-$3.08 it
predicted in September. The news kept GIS shares cycling through a
positive, eight-month trading channel. The price is currently
consolidating at the base of that channel, where oversold CCI, Momentum
and MACD technical parameters suggest the potential for a rise back
toward the top. Correspondence of the stock's 90-day moving average to
the base of the channel backs the rebound notion.
Brokers recommend the stock with four "strong buys," three "buys," twelve "holds" and two "sells." The GIS P/E ratio (18.33), Price to Sales ratio (1.63), Price to Book ratio (3.52), Price to Cash Flow ratio (13.29), Price to Free Cash Flow ratio (29.61) and Return on Equity (20.47%) compare favorably with industry, sector and S&P 500 averages.
The stock is one of those used to calculate the S&P 500 Index. Institutional investors hold about 73% of the outstanding shares. Over the past 52 weeks, GIS has traded between $47.05 and $59.23. A stop-loss of $52.00 looks good here.
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Last year I purchased 1000 shares of Delta airlines.{they are in bankruptsey] what happens if they are purchased or come out of bankruptsey, will I loose my money. ? Thank you. AL E.
1/30/07 12:57 AM
"Although a company may emerge from bankruptcy as a viable entity, generally, the creditors and the bondholders become the new owners of the shares. In most instances, the company's plan of reorganization will cancel the existing equity shares. This happens in bankruptcy cases because secured and unsecured creditors are paid from the company's assets before common stockholders. And in situations where shareholders do participate in the plan, their shares are usually subject to substantial dilution."
Regarding a potential purchase of the firm, it's probably best to remember that there are hurdles to such action. Think of US Airways' improved offer. The last time an airline merger of this size was proposed was when United wanted to buy US Airways, back in 2001. The Justice Department blocked the move on antitrust grounds. To be sure, Justice would probably be more receptive to the notion now, since industry competition has increased. Still, that's one hurdle. Then, of course, there is opposition from Delta's management. An unofficial committee of unsecured creditors is urging the official creditors committee to consider the improved US Airways proposal, but opposition by Delta management still counts. Finally, any merger would need an OK from the bankruptcy court overseeing Delta's operations. Hurdle three. Let's see where shareholders stand, after some of these hurdles are negotiated.
Larry Schutts