General Mills Stock Goes Stale After Q2 Earnings: 'This Is A Crowded Trade'

Zinger Key Points
  • “[General Mills] has had an unbelievable run and an unwarranted one in my opinion," says PreMarket Prep's Dennis Dick.
  • The author of this article alerted investors to the only major support for the issue, a trio of lows from late November.

One of the few bright spots in the markets this year has been companies in the food industry.

With inflation or not, people need to eat and feed their families. And companies in this industry can more easily pass on any increases in costs to produce their products, as consumers will cut corners somewhere else to put meals on the table.

With that in mind, General Mills, Inc. GIS is the PreMarket Prep Stock of the Day following its second-quarter report.

Winner, Winner, Chicken Dinner: General Mills ended 2021 at $67.38 and ended Monday’s session at $87.12. That marks a year-to-date gain of $19.74 or 29%. As of Monday’s closing price, the S&P 500 cash index is lower by 1,001 handles or 21%.

The end result is that General Mills has outperformed the index by 50% as of Monday’s close.

Street Leans The Wrong Way: Despite the S&P 500 index being in the midst of a four-day losing streak, General Mills has been higher in five of its last six sessions, with the one outlier being a loss of a few cents Friday.

General Mills' Q2 Report: Before the opening on Tuesday, the company reported quarterly earnings of $1.10 per share, which beat the analyst consensus estimate of $1.06 by 3.77%.

This is an 11.11% increase over earnings of 99 cents per share from the same period last year. The company reported quarterly sales of $5.22 billion, which beat the analyst consensus estimate of $5.19 billion by 0.6%. This is a 3.92% increase over sales of $5.02 billion in the same period last year.

In addition, the company raised FY23 organic net sales growth expectations from up 6%-7% To 8%-9% and raised FY23 EPS growth expectations from 2%-5% to 4%-6%

PreMarket Prep's Take: When the issue was being covered on the show Tuesday, it was already in the red by over $2 at the $84.50 area.

“This is trading 21 times forward earnings. If looking to go long at these levels, you would be better off going to cash and getting 4%-5%," said co-host Dennis Dick.

“[General Mills] has had an unbelievable run and an unwarranted one in my opinion. This is a crowded trade that money managers have been hiding out in.”

The author of this article alerted investors to the only major support for the issue, a trio of lows flanking the $82.50 area from late November.

GIS Price Action: After a much lower opening print ($83.14 vs. $87.12), General Mills had a brief spike to just under $84 Tuesday morning and resumed its move lower.

In the first minute of the session, the issue swooned to just under the aforementioned support level, bottoming at $82.44 and sharply reversing course.

It rebounded to make a new high for the session at $84.55 and as of 2:45 p.m. EST was trading actively in the mid-$83 handle.

The stock ultimately lost 4.58% Tuesday, closing at $83.13.

The discussion on General Mills from Tuesday's show can be found here:

Photo via Shutterstock.

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