GIS Preview: Looking for Tasty Results

General Mills (GIS - commentary - Cramer's Take) is expected to report second-quarter 2009 results and conduct its conference call before the market opens on Wednesday. GIS is expected to grow EPS by 7.89% YOY to $1.23. Analysts' estimates have remained unchanged at the same level since GIS last reported its results.

The company has a track record of meeting or exceeding earnings estimates. I believe that this quarter will be true to form. Revenue is expected to be up 8.4% year over year to $4.01 billion, which pretty much is in line with the expected EPS growth rates.

General Mills is a part of what I refer to as the "food chain." As such, it is a consumer staple stock and is considered recession-proof. As commodity prices, energy and food rose during 2006 and 2007, General Mills, along with its peers, passed on many of those inflationary pressures to consumers with price hikes. As those commodity prices have fallen in the past quarter, General Mills' operating margins could benefit.

General Mills mostly produces branded products. My play in the sector is Ralcorp (RAH - commentary - Cramer's Take), which primarily produces generic and private-label products in addition to its recently acquired Post cereals brand from Kraft (KFT - commentary - Cramer's Take). GIS is also a big advertiser. I would not be surprised if the company has cut back on its advertising budgets; that could further contribute to the company's bottom line.

The entire consumer staple sector in general has not rebounded along with the overall markets. Part of this could be due to a strengthening dollar. A solid report with an EPS figure which beats estimates could provide some life to the group.

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At the time of publication, Rothbort was long RAH, although positions can change at any time.

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational Web site TheFinanceProfessor.com.

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email.