General Mills, Inc. Can't Avoid the Curse of the Rising Dollar

By Markets Fool.com

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Cheerios is still one of General Mills' most important products. Image owned by The Motley Fool.

There aren't many companies as steady year after year as General Mills , but it isn't wowing anyone with its growth numbers these days. Fiscal-third-quarter results, out this morning, showed a 1% decline in revenue to $4.35 billion, and adjusted earnings per share increased 13% to $0.70.

In an economy that grew at 2.2% those growth numbers aren't impressive, but General Mills is dealing with the same headwinds as a lot of large corporations today.

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Behind the numbers
Quarterly sales were down 1%, but the components of negative growth are just as important as the number itself. Volume fell 1% in the quarter, but pricing increased 4%, only to be canceled out by a 4% negative impact on foreign currency translation. Currency fluctuations have been hitting companies with a large percentage of international exposure, and while it will hurt numbers short-term I wouldn't be too concerned about currency fluctuations long-term.

The volume figure is a little more concerning, and so are some of the products that are struggling. Retail baking product sales were down 9%, meals were down 2%, and cereal was just flat for the quarter. Baking products and cereal, in particular, are General Mills' bread and butter, so weakness there isn't a good sign.

Where the company was able to pick up some sales was in snacks and yogurt, which saw 14% and 10% sales increases, respectively.

What's plaguing General Mills today
General Mills will never be a high-growth stock, and it's often viewed as a safe investment in bad economic times because it sells consumer staples that literally feed the world at a relatively low cost. That works in the company's favor in bad times, but works against it in good economic times, like today, when people trade up for more expensive food items.

Just look at last quarter's 1% decline in sales compared to an 8% increase in sales in the same quarter in 2009, when we were in the depths of the recession. This is a company that's built to weather good times and excel in bad times.

The best reason to jump on General Mills stock today
While General Mills' results may not be in the category of high growth, there are still great reasons to own the company long-term. It's selling a necessary product that as I mentioned does well in bad economic times. It's also been able to grow slowly but surely on both the top and bottom lines.

GIS Revenue (TTM) Chart

GIS Revenue (TTM) data by YCharts

Throw in a 3.4% dividend yield and this is a stock you can buy and forget about for a long time.

Sometimes slow and steady wins the race, and for General Mills even slow growth of 3% (ex-currency) in 2015 would be decent. It won't be able to compete with high-growth tech stocks, but it's also a company I have high confidence will be around in another 50 or 100 years. That's not something many companies can say in today's market, and it makes General Mills a solid buy even after a lackluster quarterly report.

The article General Mills, Inc. Can't Avoid the Curse of the Rising Dollar originally appeared on Fool.com.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.