General Mills Inc., the maker of Cheerios and Yoplait yogurt, said Wednesday that its fiscal first-quarter profit surged 51 percent on lower ingredient costs and strong demand for its products.
The results, which well exceeded expectations, prompted the food maker to lift its full-year earnings outlook. And shares of the Minneapolis-based company rose $3.21, or more than 5 percent, to $64.18 in morning trading.
The company earned $420.6 million, or $1.25 per share for the quarter, up from $278.5 million, or 79 cents per share, a year ago.
Excluding an expense related to commodity positions, profit was $1.28 per share and easily topped the $1.03-per-share estimate of analysts polled by Thomson Reuters. Analysts' estimates normally exclude one-time items.
Like many food makers, General Mills benefited from lower costs for fuel and ingredients, which hit record highs last year. Many companies raised their prices to cope, although General Mills said it kept its pricing increases modest during that time. But as those commodity prices eased, the company's profitability has improved.
The company has also seen strong sales, helped in part by consumers increasingly eating at home during the recession.
Revenue grew 1 percent to $3.52 billion with strong sales of cereal and Pillsbury products, which jumped 9 percent and 12 percent, respectively. The results beat Wall Street's estimate of $3.49 billion.
General Mills CEO Ken Powell said the company has reinvested some of that money into its advertising and marketing efforts during the quarter — boosting the expense by 16 percent. And the company plans to continue heavy investment in marketing to drive sales.
Jack Russo, a senior consumer analyst at Edward Jones, said the results were impressive and hinged on lower commodity costs. And he said General Mills remains well positioned for the coming year with strong, innovative products that are focused on health. He said the company may have even underestimated its potential for 2010 in its guidance.
"They are right in the sweet spot," he said.
General Mills raised its 2010 adjusted profit to a range of $4.40 to $4.45 per share, up from $4.20 to $4.25.
Analysts forecast net income of $4.26 per share for the year.
"This market is working well, it's sustainable and so we're sticking with it," Powell said.
