General Mills, Inc. (GIS) shares ended the day down by 0.83% to $59.76 after reporting lower than expected third quarter results and affirming its 2017 organic sales forecast.
For the third quarter, earnings per share came in at $0.72 earnings per share, a one cent beat from the analyst estimate. Revenue dropped for a seventh consecutive time and missed with $3.79 billion, the forecast was eyed at $3.82 billion. For 2017, the maker of Cheerios and Trix, affirmed 2017 EPS +5-7%, implies $3.07-3.12. Fiscal 2017 organic net sales growth was also +4%.
Chairman and Chief Executive Officer Ken Powell noted, “Our third-quarter results finished in line with our expectations and keep us on track to deliver the guidance we updated last month. Our net sales declined due primarily to gaps in pricing and promotional activity in key U.S. businesses. Our cost savings efforts helped us expand our adjusted operating profit margin and drive growth in adjusted diluted EPS. Looking ahead, we are highly focused on improving our topline performance while continuing to expand our margins. We've added support in the fourth quarter to strengthen key business lines, and we're pursuing global growth priorities that will further improve our sales trends beyond fiscal 2017."
Price action on the GIS daily chart shows that price is now trending below all three key SMA(s). If the bearish move continues, we could see price find support from a potential double bottom pattern at the $58.70 region. If valid, we could see a bounce towards the $62 region. If the bearish move accelerates and the pattern is invalidated key support may come from the 2016 low of $53.53.
The Trade: Buy GIS at $58.50, with a stop loss at $58.00 and a take profit at $60.00. The Risk/Reward Ratio is 1:3