A month has gone by since the last earnings report for General Mills, Inc. (GIS Quick QuoteGIS - Free Report) . Shares have lost about 1.9% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

General Mills Beats on Q3 Earnings, Sales Fall Shy

General Mills, Inc.’s cost-saving initiatives helped it to report better-than-expected third-quarter fiscal 2017 earnings along with solid adjusted operating profit margin expansion. However, the company’s shares lost 1.44% in premarket trade on Mar 21, as sales missed expectation.

The food giant reported third-quarter fiscal 2017 adjusted earnings per share of $0.72, surpassing the Zacks Consensus Estimate of $0.71 by 1.4%. Earnings also improved 11% year over year. On a constant currency basis, earnings grew 8%.

Adjusted earnings exclude restructuring, project-related expenses, as well as mark-to-market valuation effects. Including these items, reported earnings were 61 cents per share, up 3% year over year.

Sales Remain Weak

Total revenues declined 5.2% year over year to $3.79 billion owing to lower organic sales. Sales were below the Zacks Consensus Estimate of $3.82 billion. Sales were also weak in the core U.S. Retail segment as well as in other segments.

Organically, excluding currency and acquisitions/divestures, sales were down 5%.

Price/mix improved 2%, whereas volumes declined 7%. Foreign exchange headwinds did not impact quarterly revenues.

Margins Improve

Adjusted gross margin increased 20 basis points (bps) to 35%, as input cost inflation and lower volumes were offset by savings from cost-reduction activities.

Adjusted operating margin increased 100 bps to 16.9% owing to lower administrative as well as media and advertising expenses.

Segment Performance

Beginning third quarter of fiscal 2017, the company has started reporting results under four new business groups: North America Retail, which combines U.S. retail segment and Canada region in international segment; Convenience Stores & Food Service; Europe & Australia, which is currently another international region; and Asia & Latin America, which combines the remaining two current international regions.

This structural change aims at maximizing global scale, unlocking global growth opportunities and driving efficiency.

North America Retail: Revenues from this segment declined 7% year over year to $2.50 billion due to double-digit declines in the U.S. Meals & Baking and U.S. yogurt operating units. Organic sales were down 8%. Volumes dipped 10%, while price/mix added 2% to revenues.

Segment operating profit was also down 7% year over year due to lower volumes.

Convenience Stores & Food Service: Revenues declined 1% year over year to $448 million.  Some frozen dough products partially offset the growth of the Focus 6 platforms, including cereal, biscuits, and yogurt. Organically, sales were also down 1%.

While volumes were up 1%, price/mix impacted revenues by 2% in the quarter.

Segment operating profit was up 3% year over year given the company’s cost-saving initiatives.

Europe & Australia: On a year-over-year basis, the segment’s revenues declined 3% to $424 million. Unfavorable currency headwind offset growth in Häagen-Dazs ice cream, Old El Paso Mexican products, and Nature Valley snacks. Organically, sales were up 2%.

Foreign exchange headwinds dragged revenues by 5% in the quarter. Volumes were up 1% and price/mix had a 1% favorable impact on the quarter’s results.

Segment operating profit grew 25% year over year reflecting solid cost-saving initiatives and favorable mix.

Asia & Latin America: Revenues were in line with the year-ago figure amounting to $421 million.  Foreign currency exchange had a favorable impact on revenues. Additionally, growth in Häagen-Dazs ice cream was offset by the restructuring of the snacks business in China, the net impact of divestitures and acquisitions in fiscal 2016, and declines in Latin America driven by macroeconomic challenges. Organically, sales were down 2%.

While volumes were down 3%, price/mix had a favorable impact of 1% on the quarter’s results.

Segment operating profit was up 300% year over year.

Fiscal 2017 Guidance Maintained

Organically, year-over-year sales growth is expected to drop approximately 4%. This is primarily due to a widening gap between the company's level of promotional activity and that of competitors in the U.S. yogurt and soup categories.

Adjusted earnings per share (constant currency) guidance has been maintained at the growth rate of 5% to 7% from the fiscal 2016 level.

Total segment operating profit growth is estimated in the range of -1% to 1%, on a constant currency basis. Adjusted operating profit margin is expected to expand 120 basis points to 18%.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

General Mills, Inc. Price and Consensus

 

General Mills, Inc. Price and Consensus | General Mills, Inc. Quote

VGM Scores

At this time, General Mills' stock has a subpar score of 'D',  on both growth and momentum front. Following a similar  course, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable solely for value investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.