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General Mills (GIS) Q3 Earnings Meet, Tanks on Slashed View
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General Mills, Inc. (GIS - Free Report) delivered in-line earnings and revenues in the third quarter of fiscal 2018. Meanwhile, the food giant has lowered its fiscal 2018 profit outlook to reflect higher supply chain costs.
Shares have tanked more than 8% in pre-market trading after the earnings release.
In-Line Earnings
General Mills reported third-quarter fiscal 2018 adjusted earnings per share of 79 cents, in line with the Zacks Consensus Estimate. Earnings, however, increased 10% year over year. On a constant currency basis, earnings increased 8% benefiting from lower taxes and average shares outstanding.
Adjusted earnings exclude certain items, influencing comparability of results. Including these items, reported earnings came in at $1.62 per share, reflecting a substantial increase from 61 cents a year ago.
In-Line Sales
Total revenues of $3.882 billion were almost in line with the Zacks Consensus Estimate of $3.886 billion but improved 2.3% year over year, owing to higher sales across the board.
Organically, excluding currency and acquisitions/divestures, sales increased 1%, same as the preceding quarter.
Price/mix had a 1% positive impact on its quarterly revenues but volumes had a 1% unfavorable impact on sales. Currency had a 2% positive impact on quarterly revenues.
General Mills, Inc. Price, Consensus and EPS Surprise
Adjusted gross margin declined 250 basis points (bps) to 32.5% due to higher input costs. Increased freight and logistics expenses, commodity inflation, and other operational costs, as well as higher merchandising expenses also adversely impacted the gross margin.
Adjusted operating margin also plunged 120 bps to 15.7%, owing to lower adjusted gross margins. However, lower selling, general, & administrative (SG&A) expenses, and 22% decline in advertising and media expenses had partially offset the negatives.
Segmental Performance
North America Retail: Revenues from this segment grew 1% year over year to $2.52 billion due to 6% growth in the Canada operating unit, 3% in U.S. Snacks, and 2% in U.S. Meals & Baking business units. However, net sales were down 8% in the U.S. Yogurt and 1% in U.S. Cereal.
Organic sales grew 1% versus flat growth in the prior quarter. Volumes increased 1%, but price/mix had a neutral impact on revenues.
Segment operating profit remained unchanged from the prior-year quarter owing to higher input costs. This was offset by higher sales and lower SG&A expenses.
Convenience Stores & Food Service: Revenues were up 3% year over year at $460 million. Growth in the Focus 6 platforms, including frozen meals, cereals and snacks, as well as benefits from market index pricing on bakery flour had a positive effect on the segment’s results. Organically, sales were up 3%, too. Volumes increased 1%, and price/mix had a 2% positive impact on revenues.
However, segment operating profit decreased 10% from the year-ago level owing to higher input costs.
Europe & Australia: On a year-over-year basis, the segment’s revenues improved 11% to $470 million, thanks to benefits from favorable foreign currency exchange and price/mix. However, organically, sales were down 1%.
Foreign exchange and price/mix had a 12% and 2% favorable impact on revenues, respectively, in the quarter. However, volumes decreased 3%.
However, the segment’s operating profit dropped 35.7% year over year. This was due to major input cost inflation.
Asia & Latin America: Revenues were up 3% from the year-ago quarter to $435 million. The upside was mainly driven by a favorable currency impact (+3%). Organically, sales were at par with the year-ago level.
While volumes were down 9%, price/mix had a favorable impact of 9% on the quarter’s results. Segment operating profit was down 80% year over year due to higher input costs, including currency-driven inflation and higher SG&A expenses.
Fiscal 2018 Guidance
The company expects organic sales growth between flat and down 1%. This reflects an improvement of 300-400 bps from fiscal 2017 results. Currency-related translation is likely to benefit net sales by 1%.
The company has slashed its expectation for adjusted earnings per share (constant currency) growth from flat to up 1% versus prior expectation of 1-2% growth. In fiscal 2017, the company earned $3.08 per share. The company expects currency-related translation to have a 3-cents benefit (earlier it was one cent) on fiscal 2018 adjusted earnings per share.
Total segment operating profit is now expected to decline 5-6%, compared to the previous expected range of down 1% to flat, on a constant-currency basis. This slashed view reflects higher-than-expected supply chain costs including freight and logistics, commodities, and other operational costs. The company expects to generate constant-currency total segment operating profit growth in the fourth quarter, driven by favorable net price realization mix and increased cost savings. Currency translation is expected to add 1 point to full-year total segment’s operating profit growth.
Nomad Foods is expected to witness 18.9% growth in 2018 earnings.
Medifast’s earnings are expected to grow 41.9% this year.
Post Holdings is expected to witness 69.3% growth in earnings this year.
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General Mills (GIS) Q3 Earnings Meet, Tanks on Slashed View
General Mills, Inc. (GIS - Free Report) delivered in-line earnings and revenues in the third quarter of fiscal 2018. Meanwhile, the food giant has lowered its fiscal 2018 profit outlook to reflect higher supply chain costs.
Shares have tanked more than 8% in pre-market trading after the earnings release.
In-Line Earnings
General Mills reported third-quarter fiscal 2018 adjusted earnings per share of 79 cents, in line with the Zacks Consensus Estimate. Earnings, however, increased 10% year over year. On a constant currency basis, earnings increased 8% benefiting from lower taxes and average shares outstanding.
Adjusted earnings exclude certain items, influencing comparability of results. Including these items, reported earnings came in at $1.62 per share, reflecting a substantial increase from 61 cents a year ago.
In-Line Sales
Total revenues of $3.882 billion were almost in line with the Zacks Consensus Estimate of $3.886 billion but improved 2.3% year over year, owing to higher sales across the board.
Organically, excluding currency and acquisitions/divestures, sales increased 1%, same as the preceding quarter.
Price/mix had a 1% positive impact on its quarterly revenues but volumes had a 1% unfavorable impact on sales. Currency had a 2% positive impact on quarterly revenues.
General Mills, Inc. Price, Consensus and EPS Surprise
General Mills, Inc. Price, Consensus and EPS Surprise | General Mills, Inc. Quote
Margins Decline
Adjusted gross margin declined 250 basis points (bps) to 32.5% due to higher input costs. Increased freight and logistics expenses, commodity inflation, and other operational costs, as well as higher merchandising expenses also adversely impacted the gross margin.
Adjusted operating margin also plunged 120 bps to 15.7%, owing to lower adjusted gross margins. However, lower selling, general, & administrative (SG&A) expenses, and 22% decline in advertising and media expenses had partially offset the negatives.
Segmental Performance
North America Retail: Revenues from this segment grew 1% year over year to $2.52 billion due to 6% growth in the Canada operating unit, 3% in U.S. Snacks, and 2% in U.S. Meals & Baking business units. However, net sales were down 8% in the U.S. Yogurt and 1% in U.S. Cereal.
Organic sales grew 1% versus flat growth in the prior quarter. Volumes increased 1%, but price/mix had a neutral impact on revenues.
Segment operating profit remained unchanged from the prior-year quarter owing to higher input costs. This was offset by higher sales and lower SG&A expenses.
Convenience Stores & Food Service: Revenues were up 3% year over year at $460 million. Growth in the Focus 6 platforms, including frozen meals, cereals and snacks, as well as benefits from market index pricing on bakery flour had a positive effect on the segment’s results. Organically, sales were up 3%, too. Volumes increased 1%, and price/mix had a 2% positive impact on revenues.
However, segment operating profit decreased 10% from the year-ago level owing to higher input costs.
Europe & Australia: On a year-over-year basis, the segment’s revenues improved 11% to $470 million, thanks to benefits from favorable foreign currency exchange and price/mix. However, organically, sales were down 1%.
Foreign exchange and price/mix had a 12% and 2% favorable impact on revenues, respectively, in the quarter. However, volumes decreased 3%.
However, the segment’s operating profit dropped 35.7% year over year. This was due to major input cost inflation.
Asia & Latin America: Revenues were up 3% from the year-ago quarter to $435 million. The upside was mainly driven by a favorable currency impact (+3%). Organically, sales were at par with the year-ago level.
While volumes were down 9%, price/mix had a favorable impact of 9% on the quarter’s results. Segment operating profit was down 80% year over year due to higher input costs, including currency-driven inflation and higher SG&A expenses.
Fiscal 2018 Guidance
The company expects organic sales growth between flat and down 1%. This reflects an improvement of 300-400 bps from fiscal 2017 results. Currency-related translation is likely to benefit net sales by 1%.
The company has slashed its expectation for adjusted earnings per share (constant currency) growth from flat to up 1% versus prior expectation of 1-2% growth. In fiscal 2017, the company earned $3.08 per share. The company expects currency-related translation to have a 3-cents benefit (earlier it was one cent) on fiscal 2018 adjusted earnings per share.
Total segment operating profit is now expected to decline 5-6%, compared to the previous expected range of down 1% to flat, on a constant-currency basis. This slashed view reflects higher-than-expected supply chain costs including freight and logistics, commodities, and other operational costs. The company expects to generate constant-currency total segment operating profit growth in the fourth quarter, driven by favorable net price realization mix and increased cost savings. Currency translation is expected to add 1 point to full-year total segment’s operating profit growth.
Zacks Rank & Other Key Picks
General Mills carries a Zacks Rank #2 (Buy).
Investors can consider a few other top-ranked stocks in the Consumer Staples sector that include Nomad Foods Limited (NOMD - Free Report) , Medifast, Inc. (MED - Free Report) and Post Holdings, Inc. (POST - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nomad Foods is expected to witness 18.9% growth in 2018 earnings.
Medifast’s earnings are expected to grow 41.9% this year.
Post Holdings is expected to witness 69.3% growth in earnings this year.
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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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