Why General Mills Shares Popped 10% Today

What happened

Shares of cereal giant General Mills (NYSE: GIS) jumped as much as 10% in trading today after the company reported fiscal second-quarter 2019 earnings. At 12:30 p.m. EST on Wednesday, shares were still up 6.8% on the day.

So what

Quarterly sales jumped 5% in the quarter to $4.41 billion, and were up 7% on a constant currency basis as the Blue Buffalo acquisition began hitting the income statement. However, organic sales actually fell 1% in the quarter, and revenue fell short of the $4.51 billion that analysts expected.

Net income was down 20% versus a year ago to $343 million, and earnings per share fell 23% to $0.57. On an adjusted basis, which pulls out one-time items like asset impairments, earnings were $0.85 per share, easily topping the $0.64 estimate from Wall Street.

Now what

General Mills has benefited from raising prices across its product line, which offset rising costs for raw materials and shipping. But the company still isn't growing organically, which is a concern long term. Today's reaction is really a case of the market having even lower expectations than reality, but it will still be a long road ahead for General Mills to become the steady growth company investors would like it to be.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.