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16.01.2020 13:22:00

Pet Food Success Masks Trouble for General Mills

Food giant General Mills' (NYSE: GIS) stock rose about 2% after the company reported earnings on Dec. 18, 2019. The broader market, as measured by the S&P 500, was flat, so Wall Street seemed pleased by the financial results. And there were things to be happy about in the company's fiscal second-quarter 2020 earnings release. However, there were also things to be a little worried about, too. Here's the good news and the bad.The single biggest piece of good news out of General Mills' financial results was that its pet food business grew 16% year over year on a material increase in volume. This is huge, because the packaged food company made a sizable bet on the space when it bought healthy pet food maker Blue Buffalo in 2018. Investors were concerned that it was paying a very high price for the company at $8 billion. General Mills' take was that it was paying for a high-growth business, and that future growth would make the price tag look much less onerous over time. This deal appears to be playing out as management hoped so far, and the quarter was one more example of the trend. Image source: Getty ImagesContinue reading
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