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General Mills (GIS) Ups Guidance on Q2 Earnings & Sales Beat
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General Mills, Inc. (GIS - Free Report) posted solid second-quarter fiscal 2023 results as the top and bottom lines grew year over year and surpassed the Zacks Consensus Estimate. Considering impressive first-half results and robust business momentum, management pulled up its fiscal 2023 organic net sales, adjusted operating profit and adjusted earnings per share (EPS) growth guidance.
Management stated that it remains focused on executing its Accelerate strategy amid the ongoing volatility in the operating landscape. To this end, it has been committed to brand building and innovation, solidifying its capacities and reshaping its portfolio. GIS is on track with prioritizing core markets, global platforms and local brands, along with reshaping its portfolio via strategic acquisitions and divestitures.
Quarterly Highlights
General Mills posted adjusted earnings of $1.10 per share, which beat the Zacks Consensus Estimate of $1.06 and our estimate of $1.04. The bottom line rose 12% year over year on a constant-currency (cc) basis. The upside can be mainly attributed to the elevated adjusted operating profit, the reduced adjusted effective tax rate and decreased net shares outstanding, somewhat negated by the reduced benefit plan non-service income.
General Mills, Inc. Price, Consensus and EPS Surprise
GIS reported net sales of $5,220.7 million, which beat the Zacks Consensus Estimate of $5,150 million and our estimate of $5,106.7 million. The top line advanced 4% from the year-ago quarter’s figure. The metric included a five-point unfavorable impact of net divestitures and acquisition activity and a one-point adverse impact of currency movements.
Organic net sales rose 11% due to the favorable organic net price realization and mix. These were somewhat offset by the reduced organic pound volume.
The adjusted gross margin expanded 100 basis points (bps) to 33.2% due to the positive net price realization and mix, along with gains from Holistic Margin Management (“HMM”) cost savings. These were somewhat offset by input cost inflation, supply-chain deleverage and the increased other costs of goods sold.
The cc adjusted operating profit rose 7%, backed by increased adjusted gross profit dollars, somewhat offset by higher adjusted SG&A expenses. The adjusted operating profit margin expanded 60 bps to 16.9%.
Segmental Performance
North America Retail: Revenues in the segment came in at $3,373.1 million, up 11% year over year. The uptick can be attributed to the positive net price realization and mix, which somewhat offset the reduced pound volume, and the helper and Suddenly Salad divestiture.
Organic net sales grew 13% year over year. The segment’s operating profit increased 24% to $837 million.
International: Revenues in the segment came in at $671.7 million, down 27% year over year. The downside can be attributed to the reduced pound volume, which includes the impact of yogurt and dough divestitures, as well as the ice cream recall. Also, the adverse impact of unfavorable currency rates is a headwind. That said, the favorable net price realization and mix offered some respite.
Organic net sales grew 5% year over year due to advancements in Brazil, distributor markets, and Europe and Australia, partly negated by softness in China. The segment’s operating profit slumped from $59 million to $18 million.
Pet: Revenues came in at $592.9 million, flat year over year, as the positive net price realization and mix were countered by the reduced pound volume. Organic sales also remained flat year over year.
Management expects the Pet sales performance to speed up in the second half of fiscal 2023, led by higher capacity, better customer service, elevated brand-building investment and anticipation of stable retailer inventory levels. The segment’s operating profit came in at $87 million compared with the $132 million reported in the year-ago period.
North America Foodservice: Revenues came in at $583 million, up 24% year over year, reflecting the positive net price realization and mix, including a benefit of five points from market index pricing on bakery flour. Net sales also included a six-point gain from the TNT Crust buyout.
Organic sales rose 17%. The segment’s operating profit jumped 20% to $82 million.
Other Financial Aspects
General Mills ended the quarter with cash and cash equivalents of $644.1 million, long-term debt of $8,622.5 million and total shareholders’ equity of $10,121.2 million.
GIS generated $1.2 million in net cash from operating activities through the first six months of fiscal 2023. Capital investments amounted to $227 million during the same period. The company paid out dividends worth $648 million and bought roughly 12.1 million shares for $901 million in the said time frame.
Other Developments
Cc sales from the joint ventures of Cereal Partners Worldwide increased 2%. In Haagen-Dazs Japan, sales fell 10% at cc from the prior-year figure.
Fiscal 2023 Guidance
General Mills expects that the biggest factors impacting its show in fiscal 2023 are likely to be consumers’ economic status, cost inflation and supply-chain bottlenecks.
GIS anticipates volume elasticities to remain lower than historical levels in the second half of the fiscal. Compared with its previous fiscal 2023 guidance, management now anticipates greater organic net sales growth due to improved volume performance and a better price/mix.
For fiscal 2023, management expects input cost inflation of 14-15% percent of the total cost of goods sold. Management continues to expect HMM cost savings of 3-4% of the cost of goods sold. It also expects moderately reduced supply-chain hurdles and greater investments in brand building and other growth-driving initiatives compared with the year-ago period.
For fiscal 2023, organic net sales are anticipated to increase 8-9%. Earlier, management expected organic net sales growth of 6-7%. The net impact of divestitures, acquisitions and foreign currency movements is likely to lower full-year reported net sales growth by about 4.5%.
The adjusted operating profit growth at cc is now anticipated at 3-5%. Earlier, the metric was anticipated between flat and an increase of 3%. Both views include a three-point net adverse impact of divestitures and buyouts and a one-point headwind of the ice cream recall.
Adjusted EPS growth at cc is now envisioned between 4% and 6%. Previously, adjusted EPS growth at cc was expected to rise 2-5%. The raised guidance reflects greater adjusted operating profit growth and increased net interest expenses. The guidance includes a three-point net adverse impact of divestitures and buyouts and a one-point headwind of the ice cream recall.
Currency woes are still likely to have a nearly 1% adverse impact on the adjusted operating profit and the adjusted EPS. This Zacks Rank #3 (Hold) company’s shares have rallied 9.2% in the past three months compared with the industry’s growth of 8%.
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). The Chef's Warehouse has a trailing four-quarter earnings surprise of 93.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial-year sales suggests an increase of 46.5% from the year-ago reported number, while earnings indicate significant growth.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial-year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported figures.
McCormick, a manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2. MKC delivered an earnings surprise of 6.2% in the last reported quarter.
The Zacks Consensus Estimate for McCormick’s current financial-year sales suggests growth of 1.8% from the year-ago reported figure.
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General Mills (GIS) Ups Guidance on Q2 Earnings & Sales Beat
General Mills, Inc. (GIS - Free Report) posted solid second-quarter fiscal 2023 results as the top and bottom lines grew year over year and surpassed the Zacks Consensus Estimate. Considering impressive first-half results and robust business momentum, management pulled up its fiscal 2023 organic net sales, adjusted operating profit and adjusted earnings per share (EPS) growth guidance.
Management stated that it remains focused on executing its Accelerate strategy amid the ongoing volatility in the operating landscape. To this end, it has been committed to brand building and innovation, solidifying its capacities and reshaping its portfolio. GIS is on track with prioritizing core markets, global platforms and local brands, along with reshaping its portfolio via strategic acquisitions and divestitures.
Quarterly Highlights
General Mills posted adjusted earnings of $1.10 per share, which beat the Zacks Consensus Estimate of $1.06 and our estimate of $1.04. The bottom line rose 12% year over year on a constant-currency (cc) basis. The upside can be mainly attributed to the elevated adjusted operating profit, the reduced adjusted effective tax rate and decreased net shares outstanding, somewhat negated by the reduced benefit plan non-service income.
General Mills, Inc. Price, Consensus and EPS Surprise
General Mills, Inc. price-consensus-eps-surprise-chart | General Mills, Inc. Quote
GIS reported net sales of $5,220.7 million, which beat the Zacks Consensus Estimate of $5,150 million and our estimate of $5,106.7 million. The top line advanced 4% from the year-ago quarter’s figure. The metric included a five-point unfavorable impact of net divestitures and acquisition activity and a one-point adverse impact of currency movements.
Organic net sales rose 11% due to the favorable organic net price realization and mix. These were somewhat offset by the reduced organic pound volume.
The adjusted gross margin expanded 100 basis points (bps) to 33.2% due to the positive net price realization and mix, along with gains from Holistic Margin Management (“HMM”) cost savings. These were somewhat offset by input cost inflation, supply-chain deleverage and the increased other costs of goods sold.
The cc adjusted operating profit rose 7%, backed by increased adjusted gross profit dollars, somewhat offset by higher adjusted SG&A expenses. The adjusted operating profit margin expanded 60 bps to 16.9%.
Segmental Performance
North America Retail: Revenues in the segment came in at $3,373.1 million, up 11% year over year. The uptick can be attributed to the positive net price realization and mix, which somewhat offset the reduced pound volume, and the helper and Suddenly Salad divestiture.
Organic net sales grew 13% year over year. The segment’s operating profit increased 24% to $837 million.
International: Revenues in the segment came in at $671.7 million, down 27% year over year. The downside can be attributed to the reduced pound volume, which includes the impact of yogurt and dough divestitures, as well as the ice cream recall. Also, the adverse impact of unfavorable currency rates is a headwind. That said, the favorable net price realization and mix offered some respite.
Organic net sales grew 5% year over year due to advancements in Brazil, distributor markets, and Europe and Australia, partly negated by softness in China. The segment’s operating profit slumped from $59 million to $18 million.
Pet: Revenues came in at $592.9 million, flat year over year, as the positive net price realization and mix were countered by the reduced pound volume. Organic sales also remained flat year over year.
Management expects the Pet sales performance to speed up in the second half of fiscal 2023, led by higher capacity, better customer service, elevated brand-building investment and anticipation of stable retailer inventory levels. The segment’s operating profit came in at $87 million compared with the $132 million reported in the year-ago period.
North America Foodservice: Revenues came in at $583 million, up 24% year over year, reflecting the positive net price realization and mix, including a benefit of five points from market index pricing on bakery flour. Net sales also included a six-point gain from the TNT Crust buyout.
Organic sales rose 17%. The segment’s operating profit jumped 20% to $82 million.
Other Financial Aspects
General Mills ended the quarter with cash and cash equivalents of $644.1 million, long-term debt of $8,622.5 million and total shareholders’ equity of $10,121.2 million.
GIS generated $1.2 million in net cash from operating activities through the first six months of fiscal 2023. Capital investments amounted to $227 million during the same period. The company paid out dividends worth $648 million and bought roughly 12.1 million shares for $901 million in the said time frame.
Other Developments
Cc sales from the joint ventures of Cereal Partners Worldwide increased 2%. In Haagen-Dazs Japan, sales fell 10% at cc from the prior-year figure.
Fiscal 2023 Guidance
General Mills expects that the biggest factors impacting its show in fiscal 2023 are likely to be consumers’ economic status, cost inflation and supply-chain bottlenecks.
GIS anticipates volume elasticities to remain lower than historical levels in the second half of the fiscal. Compared with its previous fiscal 2023 guidance, management now anticipates greater organic net sales growth due to improved volume performance and a better price/mix.
For fiscal 2023, management expects input cost inflation of 14-15% percent of the total cost of goods sold. Management continues to expect HMM cost savings of 3-4% of the cost of goods sold. It also expects moderately reduced supply-chain hurdles and greater investments in brand building and other growth-driving initiatives compared with the year-ago period.
For fiscal 2023, organic net sales are anticipated to increase 8-9%. Earlier, management expected organic net sales growth of 6-7%. The net impact of divestitures, acquisitions and foreign currency movements is likely to lower full-year reported net sales growth by about 4.5%.
The adjusted operating profit growth at cc is now anticipated at 3-5%. Earlier, the metric was anticipated between flat and an increase of 3%. Both views include a three-point net adverse impact of divestitures and buyouts and a one-point headwind of the ice cream recall.
Adjusted EPS growth at cc is now envisioned between 4% and 6%. Previously, adjusted EPS growth at cc was expected to rise 2-5%. The raised guidance reflects greater adjusted operating profit growth and increased net interest expenses. The guidance includes a three-point net adverse impact of divestitures and buyouts and a one-point headwind of the ice cream recall.
Currency woes are still likely to have a nearly 1% adverse impact on the adjusted operating profit and the adjusted EPS. This Zacks Rank #3 (Hold) company’s shares have rallied 9.2% in the past three months compared with the industry’s growth of 8%.
Looking for Consumer Staple Stocks? Check These
Some better-ranked stocks are The Chef's Warehouse (CHEF - Free Report) , Conagra Brands (CAG - Free Report) and McCormick & Company (MKC - Free Report) .
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). The Chef's Warehouse has a trailing four-quarter earnings surprise of 93.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial-year sales suggests an increase of 46.5% from the year-ago reported number, while earnings indicate significant growth.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial-year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported figures.
McCormick, a manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2. MKC delivered an earnings surprise of 6.2% in the last reported quarter.
The Zacks Consensus Estimate for McCormick’s current financial-year sales suggests growth of 1.8% from the year-ago reported figure.