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General Mills (GIS) Tops Q1 Earnings Estimates, Raises View
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General Mills, Inc. (GIS - Free Report) posted robust first-quarter fiscal 2023 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate. Considering impressive fiscal first-quarter results and the company’s confidence in its ability to continuously adapt to volatility environment management is raising its fiscal 2023 organic net sales, operating profit and earnings per share (EPS) view.
GIS is progressing well with the Accelerate strategy, which aims to drive sustainable, profitable growth and robust shareholder returns. General Mills 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 $1.11 per share that came ahead of the Zacks Consensus Estimate of $1.00 and our estimate of $1.00. The bottom line rose 13% year over year on a constant-currency (cc) basis. The upside can be mainly attributed to the elevated adjusted operating profit.
The company reported net sales of $4,717.6 million that came ahead of the Zacks Consensus Estimate of $4,674.3 million and our estimate of $4,553.6 million. The top line advanced 4% from the year-ago quarter’s figure. The metric included a 5-point unfavorable impact of net divestitures and acquisition activity and a 1-point adverse impact of currency movements. Organic net sales rose 10% due to the favorable organic net price realization and mix. These were somewhat offset by reduced organic pound volume.
General Mills, Inc. Price, Consensus and EPS Surprise
The adjusted gross margin expanded 20 basis points (bps) to 34.9%, courtesy of 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 impact of market index pricing on bakery flour.
Constant-currency adjusted operating profit rose 8%, driven by increased adjusted gross profit dollars, somewhat offset by higher adjusted selling, general and administrative expenses. The adjusted operating profit margin expanded 70 bps to 18.7%.
Segmental Performance
North America Retail: Revenues in the segment came in at $2,988.8 million, up 10% 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 12% year over year. The segment’s operating profit increased 20% to $777.8 million.
International: Revenues in the segment came in at $652.5 million, down 30% year over year. The downside can be attributed to reduced pound volume, which includes the impact of yogurt and dough divestitures as well as ice cream recall. Also, adverse impact from unfavorable currency rates is a headwind. That said, favorable net price realization and mix offered some respite. Organic net sales fell 2% year over year. The segment’s operating profit slumped 43% to $34.8 million.
Pet: Revenues came in at $579.9 million, up 19% year over year, led by positive net price realization and mix. Net sales included 5 points of gains from the pet treats business buyout (concluded on Jul 6, 2021). Organic sales increased 14% year over year. The segment’s operating profit increased 7% to $123.1 million.
North America Foodservice: Revenues came in at $496.4 million, up 21% year over year and reflecting positive net price realization and mix. Net sales included 3 point benefit from the TNT Crust buyout. Organic sales rose 18% as well. The segment’s operating profit declined 25% to $53.6 million.
Image Source: Zacks Investment Research
Other Financial Aspects
General Mills ended the quarter with cash and cash equivalents of $594.4 million, long-term debt of $8,474.6 million and total shareholders’ equity of $10,574.8 million. GIS generated $388.8 million in net cash from operating activities for the quarter that ended Aug 28, 2022. Capital investments amounted to $91 million.
The company paid out dividends worth $325 million and bought roughly 6.9 million shares for $501 million in the reported quarter.
Other Developments
Cc sales from the joint ventures of Cereal Partners Worldwide increased 3%. In Haagen-Dazs Japan, sales fell 8% at cc from the prior-year figure.
Fiscal 2023 Guidance
General Mills still expects the biggest factors impacting its show in the fiscal 2023 are likely to be consumers’ economic status, cost inflation and supply-chain bottlenecks. The company anticipates volume elasticities to increase in the remaining quarters of fiscal 2023 but remain lower than historical levels. Compared with its initial fiscal 2023 guidance, management now anticipates reduced volume elasticities and improved volume performance along with higher input cost inflation to the tune of 14-15% percent of total cost of goods sold. It also expects greater investments in brand building and other growth-driving initiatives.
Management continues to expect HMM cost savings of 3-4% of the cost of goods sold and a low-double-digit positive price/mix in fiscal 2023. It still anticipates moderately reduced supply chain disruptions for the full year.
For fiscal 2023, organic net sales are anticipated to increase 6-7%. Earlier, management expected organic net sales growth of 4-5%.
The adjusted operating profit growth at cc is now anticipated to be flat to 3% growth. This includes a 3-point net adverse impact of divestitures and buyouts as well as 1 point headwind from the ice cream recall. Earlier, the metric was anticipated between a 2% decline and an increase of 1%, including a 3-point net adverse impact of divestitures and buyouts.
Adjusted EPS growth at cc is now envisioned to be between 2% and 5%. This includes a 3-point net adverse impact of divestitures and buyouts as well as 1 point headwind from the ice cream recall. Previously, adjusted EPS growth at cc was expected to be flat to up 3%, including a 3-point net adverse impact of divestitures and buyouts. Currency woes are likely to have a nearly 1% adverse impact on the adjusted operating profit and adjusted EPS.
Shares of this Zacks Rank #3 (Hold) company have gained 11.1% in the past three months compared with the industry’s 3.4% growth.
Chef’s Warehouse, a distributor of specialty food products in the United States, currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 355.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chef’s Warehouse’s current financial year sales suggests growth of 40.7% from the year-ago reported number.
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks Rank of 1. LANC delivered an earnings surprise of 170% in the last reported quarter.
The Zacks Consensus Estimate for Lancaster Colony’s current financial year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
J. M. Smucker, which manufactures and markets branded food and beverage products, carries a Zacks Rank #2 (Buy) at present. J. M. Smucker has a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for SJM’s current financial year sales suggests growth of 4.4% from the year-ago period’s reported figure.
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General Mills (GIS) Tops Q1 Earnings Estimates, Raises View
General Mills, Inc. (GIS - Free Report) posted robust first-quarter fiscal 2023 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate. Considering impressive fiscal first-quarter results and the company’s confidence in its ability to continuously adapt to volatility environment management is raising its fiscal 2023 organic net sales, operating profit and earnings per share (EPS) view.
GIS is progressing well with the Accelerate strategy, which aims to drive sustainable, profitable growth and robust shareholder returns. General Mills 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 $1.11 per share that came ahead of the Zacks Consensus Estimate of $1.00 and our estimate of $1.00. The bottom line rose 13% year over year on a constant-currency (cc) basis. The upside can be mainly attributed to the elevated adjusted operating profit.
The company reported net sales of $4,717.6 million that came ahead of the Zacks Consensus Estimate of $4,674.3 million and our estimate of $4,553.6 million. The top line advanced 4% from the year-ago quarter’s figure. The metric included a 5-point unfavorable impact of net divestitures and acquisition activity and a 1-point adverse impact of currency movements. Organic net sales rose 10% due to the favorable organic net price realization and mix. These were somewhat offset by reduced organic pound volume.
General Mills, Inc. Price, Consensus and EPS Surprise
General Mills, Inc. price-consensus-eps-surprise-chart | General Mills, Inc. Quote
The adjusted gross margin expanded 20 basis points (bps) to 34.9%, courtesy of 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 impact of market index pricing on bakery flour.
Constant-currency adjusted operating profit rose 8%, driven by increased adjusted gross profit dollars, somewhat offset by higher adjusted selling, general and administrative expenses. The adjusted operating profit margin expanded 70 bps to 18.7%.
Segmental Performance
North America Retail: Revenues in the segment came in at $2,988.8 million, up 10% 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 12% year over year. The segment’s operating profit increased 20% to $777.8 million.
International: Revenues in the segment came in at $652.5 million, down 30% year over year. The downside can be attributed to reduced pound volume, which includes the impact of yogurt and dough divestitures as well as ice cream recall. Also, adverse impact from unfavorable currency rates is a headwind. That said, favorable net price realization and mix offered some respite. Organic net sales fell 2% year over year. The segment’s operating profit slumped 43% to $34.8 million.
Pet: Revenues came in at $579.9 million, up 19% year over year, led by positive net price realization and mix. Net sales included 5 points of gains from the pet treats business buyout (concluded on Jul 6, 2021). Organic sales increased 14% year over year. The segment’s operating profit increased 7% to $123.1 million.
North America Foodservice: Revenues came in at $496.4 million, up 21% year over year and reflecting positive net price realization and mix. Net sales included 3 point benefit from the TNT Crust buyout. Organic sales rose 18% as well. The segment’s operating profit declined 25% to $53.6 million.
Image Source: Zacks Investment Research
Other Financial Aspects
General Mills ended the quarter with cash and cash equivalents of $594.4 million, long-term debt of $8,474.6 million and total shareholders’ equity of $10,574.8 million. GIS generated $388.8 million in net cash from operating activities for the quarter that ended Aug 28, 2022. Capital investments amounted to $91 million.
The company paid out dividends worth $325 million and bought roughly 6.9 million shares for $501 million in the reported quarter.
Other Developments
Cc sales from the joint ventures of Cereal Partners Worldwide increased 3%. In Haagen-Dazs Japan, sales fell 8% at cc from the prior-year figure.
Fiscal 2023 Guidance
General Mills still expects the biggest factors impacting its show in the fiscal 2023 are likely to be consumers’ economic status, cost inflation and supply-chain bottlenecks. The company anticipates volume elasticities to increase in the remaining quarters of fiscal 2023 but remain lower than historical levels. Compared with its initial fiscal 2023 guidance, management now anticipates reduced volume elasticities and improved volume performance along with higher input cost inflation to the tune of 14-15% percent of total cost of goods sold. It also expects greater investments in brand building and other growth-driving initiatives.
Management continues to expect HMM cost savings of 3-4% of the cost of goods sold and a low-double-digit positive price/mix in fiscal 2023. It still anticipates moderately reduced supply chain disruptions for the full year.
For fiscal 2023, organic net sales are anticipated to increase 6-7%. Earlier, management expected organic net sales growth of 4-5%.
The adjusted operating profit growth at cc is now anticipated to be flat to 3% growth. This includes a 3-point net adverse impact of divestitures and buyouts as well as 1 point headwind from the ice cream recall. Earlier, the metric was anticipated between a 2% decline and an increase of 1%, including a 3-point net adverse impact of divestitures and buyouts.
Adjusted EPS growth at cc is now envisioned to be between 2% and 5%. This includes a 3-point net adverse impact of divestitures and buyouts as well as 1 point headwind from the ice cream recall. Previously, adjusted EPS growth at cc was expected to be flat to up 3%, including a 3-point net adverse impact of divestitures and buyouts. Currency woes are likely to have a nearly 1% adverse impact on the adjusted operating profit and adjusted EPS.
Shares of this Zacks Rank #3 (Hold) company have gained 11.1% in the past three months compared with the industry’s 3.4% growth.
Consumer Staple Stocks Worth a Look
Some better-ranked stocks from the sector are The Chef's Warehouse (CHEF - Free Report) , Lancaster Colony (LANC - Free Report) and The J. M. Smucker (SJM - Free Report) .
Chef’s Warehouse, a distributor of specialty food products in the United States, currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 355.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chef’s Warehouse’s current financial year sales suggests growth of 40.7% from the year-ago reported number.
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks Rank of 1. LANC delivered an earnings surprise of 170% in the last reported quarter.
The Zacks Consensus Estimate for Lancaster Colony’s current financial year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
J. M. Smucker, which manufactures and markets branded food and beverage products, carries a Zacks Rank #2 (Buy) at present. J. M. Smucker has a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for SJM’s current financial year sales suggests growth of 4.4% from the year-ago period’s reported figure.