This which UBS analysts say “will define the stock’s and the wider packaged food sector’s behavior on the day.”

Code Ross and Simon Negin of UBS expect General Mills (ticker: GIS) 2022 fiscal fourth quarter to be robust, with diluted earnings per share revised from 98 cents to $1.01, which is in line with Wall Street’s expectations.

General Mills and its peers’ stock is expected to rise on Wednesday, not because of the company’s fiscal year 2022 results, but because of the company’s forecast for the fiscal year 2023. Ross and Negin write, “All eyes on the guide.”

For two reasons, guidance is more important than profits. Because it hedged its commodities exposure for this calendar year, General Mills has weathered higher crop costs and outperformed rivals that did not. Whether or if the impressive profits from this year’s well-timed hedges can be maintained next year is still an open question.

Another factor that affects the packaged food industry as a whole is the state of gross margins, which is directly tied to whether or not price increases are greater than inflation. Food prices will continue to rise as long as the conflict between Russia and Ukraine continues. This year’s round of price increases, according to investors surveyed by Ross and Negin, aren’t enough to keep up with inflation in 2023, therefore General Mills has to implement a second round. Analysts predict “investors will think guidance is feasible if not beatable” if management announces price rises on Wednesday.

Shares of General Mills were down 0.4 percent on the day. While the Consumer Staples Select Sector SPDR ETFXLP –1.34 percent (XLP), which contains General Mills, has dropped more than 5 percent, and the S&P 500SPX –2.01% has dropped 19.8 percent, General Mills’ shares have risen 4.3 percent.

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