General Mills Inc., the maker of Cheerios and Progresso soup that had been powering through the recession with earnings growth, saw its stock fall sharply Wednesday after third-quarter earnings came in lower than expected.
The Golden Valley company said it expects a strong fourth quarter, however, and it raised its full-year forecast.
A strong dollar cut into overseas performance and the falling prices of wheat and oats hurt the value of the company's inventory, the company said. Shares plummeted 11 percent.
Earnings for the quarter ended Feb. 22 were $288.9 million, down 33 percent from a year ago. Excluding one-time items, General Mills earned 79 cents a share; analysts had expected 88 cents.
Analyst Phil Dobrzynski of Riverbridge Partners said the lackluster earnings were easily explained by input costs and exchange-rate fluctuations.
"I was surprised the stock got hammered as hard as it did," he said. "It told me that people don't believe the story, or aren't looking at what the company is saying."
The company said higher prices for the ingredients it uses to make everything from Cheerios to Totino's pizzas cut into earnings; ingredient inflation should run at 9 percent this year, the company said, far above the 5 percent average seen for much of the past decade.
Sales for the quarter grew 4 percent to $3.54 billion, but pound-for-pound volume of food sold was down 1 percent for the quarter.
