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General Mills Q1 Earnings Beat Estimates on Pricing and Mix Benefits
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Key Takeaways
General Mills beat Q1 estimates, though net sales fell 3% and adjusted EPS declined 13% in constant currency.
Pricing and mix partly offset higher input costs and lower volume, but adjusted GM fell 90 bps to 33.3%.
General Mills kept fiscal 2027 guidance for $3-$3.20 EPS and organic sales down 1.5% to up 0.5%.
General Mills, Inc. (GIS - Free Report) reported first-quarter fiscal 2027 results, wherein both top and bottom lines beat the Zacks Consensus Estimate. However, both metrics declined year over year.
The company posted adjusted earnings of 75 cents per share, down 13% year over year in constant currency but above the Zacks Consensus Estimate of 72 cents. Quarterly profitability was pressured by higher input costs and lower volume, partly offset by favorable net price realization and mix.
General Mills, Inc. Price, Consensus and EPS Surprise
Net sales declined 3% year over year to $4,389.5 million, but topped the consensus estimate of $4,344 million. Organic net sales were essentially flat from the prior-year period.
GIS’ Quarterly Margin Performance
Adjusted gross margin contracted 90 basis points to 33.3% of net sales. Higher input costs drove the decline, while favorable net price realization and mix provided a partial offset. We expected an adjusted gross margin of 33.8%.
Adjusted operating profit fell 11% in constant currency to $634 million, and adjusted operating margin declined 130 basis points to 14.4%. We expected an adjusted operating margin of 14.3% for the quarter.
Decoding GIS’ Segmental Performance
North America Retail sales declined 7% year over year to $2,451.8 million, including a 4-point headwind from the U.S. yogurt divestiture. Sales fell at a double-digit rate in Big G Cereal & Canada, including the divestiture impact, declined at a mid-single-digit rate in U.S. Snacks and were flat in U.S. Meals & Baking Solutions. Organic net sales decreased 3% and trailed Nielsen-measured retail sales by about 1 point due to changes in retailer inventory. Retail sales growth improved sequentially by 2 points, while dollar-share trends strengthened across most priority categories.
Segment operating profit fell 15% to $478.6 million, both as reported and in constant currency. Lower volume and higher input costs weighed on profitability, partly offset by favorable net price realization and mix, as well as lower SG&A expenses.
North America Pet sales were essentially flat at $612.8 million. Cat food sales increased at a double-digit rate and pet treats grew at a low-single-digit rate, while dog food sales declined at a high-single-digit rate. Organic net sales were flat and exceeded all-channel retail sales growth by about 1 point, aided by an extra month of Whitebridge Pet Brands results following the alignment of its calendar with General Mills' August fiscal quarter end.
Retailer inventory changes remained a modest headwind. General Mills continues to expect retailer inventory, including changes in customer mix, to create a low-single-digit drag on full-year organic net sales for the Pet segment. Operating profit declined 12% to $99.5 million, reflecting higher input costs, lower volume and increased SG&A expenses, partly offset by favorable pricing and mix.
North America Foodservice sales increased 1% to $523.1 million despite a 2-point headwind from the U.S. yogurt divestiture. Organic net sales advanced 4%, led by growth in cereal and frozen meals. The segment held or gained market share across all of its priority businesses.
Foodservice operating profit rose 12% to $79.4 million, supported by favorable net price realization and mix, partially offset by higher input costs.
International sales grew 4% to $794.3 million, including a 1-point benefit from foreign currency exchange. Organic net sales also increased 4%, driven by growth in distributor markets, India and China.
International operating profit increased 14% to $75.2 million, or 15% in constant currency. Higher volume and lower input costs supported the improvement, partly offset by unfavorable pricing and mix and a double-digit increase in media investment.
GIS’ Financial Health Snapshot & Other Developments
The company ended the quarter with $433.1 million in cash and cash equivalents, $12,367.2 million in long-term debt and $7,450.4 million in stockholders' equity.
Cash provided by operating activities totaled $297.8 million, down from $397 million a year earlier. Capital investments were $90.5 million, compared with $109.5 million in the prior-year quarter.
General Mills paid $330.5 million in dividends and did not repurchase shares.
GIS Reaffirms Fiscal 2027 Outlook
General Mills reaffirmed fiscal 2027 organic net sales growth of down 1.5% to up 0.5%. Adjusted operating profit is expected to be down 8-13% in constant currency, while adjusted earnings are projected at $3-$3.20 per share. Free cash flow conversion is expected to be approximately 95% of adjusted after-tax earnings.
The company continues to target at least $750 million of savings from Holistic Margin Management, its global transformation initiative and other cost actions. It also expects roughly 9 points of operating-profit headwind and 11 points of earnings-per-share headwind from lapping the 53rd week, normalizing incentive expense and fiscal 2026 divestitures. The net impact of divestitures, foreign exchange and the 53rd week is expected to reduce reported sales growth by about 4%.
This Zacks Rank #3 (Hold) company’s shares have gained 1.8% in the past three months compared with the industry’s growth of 0.9%.
Image Source: Zacks Investment Research
Stocks to Consider
The Chefs' Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. At present, CHEF flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Chefs' Warehouse’s current fiscal-year sales and earnings implies growth of 10.6% and 33.7%, respectively, from the year-ago reported figures. Chefs' Warehouse delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Luckin Coffee Inc. (LKNCY - Free Report) offers retail services of freshly brewed drinks and pre-made food and beverage items in the People's Republic of China. The company currently sports a Zacks Rank of 1. LKNCY delivered a trailing four-quarter earnings surprise of 6.6%, on average.
The Zacks Consensus Estimate for Luckin Coffee’s current financial-year sales and earnings indicates growth of 33.3% and 40.8%, respectively, from the prior-year reported levels.
Utz Brands (UTZ - Free Report) engages in the manufacture, marketing and distribution of snack foods in the United States and presently carries a Zacks Rank of 2 (Buy). UTZ delivered a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year sales indicates growth of 3.7% from the year-ago numbers.
View the Zacks #1 Rank List
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General Mills Q1 Earnings Beat Estimates on Pricing and Mix Benefits
Key Takeaways
General Mills, Inc. (GIS - Free Report) reported first-quarter fiscal 2027 results, wherein both top and bottom lines beat the Zacks Consensus Estimate. However, both metrics declined year over year.
The company posted adjusted earnings of 75 cents per share, down 13% year over year in constant currency but above the Zacks Consensus Estimate of 72 cents. Quarterly profitability was pressured by higher input costs and lower volume, partly offset by favorable net price realization and mix.
General Mills, Inc. Price, Consensus and EPS Surprise
General Mills, Inc. price-consensus-eps-surprise-chart | General Mills, Inc. Quote
Net sales declined 3% year over year to $4,389.5 million, but topped the consensus estimate of $4,344 million. Organic net sales were essentially flat from the prior-year period.
GIS’ Quarterly Margin Performance
Adjusted gross margin contracted 90 basis points to 33.3% of net sales. Higher input costs drove the decline, while favorable net price realization and mix provided a partial offset. We expected an adjusted gross margin of 33.8%.
Adjusted operating profit fell 11% in constant currency to $634 million, and adjusted operating margin declined 130 basis points to 14.4%. We expected an adjusted operating margin of 14.3% for the quarter.
Decoding GIS’ Segmental Performance
North America Retail sales declined 7% year over year to $2,451.8 million, including a 4-point headwind from the U.S. yogurt divestiture. Sales fell at a double-digit rate in Big G Cereal & Canada, including the divestiture impact, declined at a mid-single-digit rate in U.S. Snacks and were flat in U.S. Meals & Baking Solutions. Organic net sales decreased 3% and trailed Nielsen-measured retail sales by about 1 point due to changes in retailer inventory. Retail sales growth improved sequentially by 2 points, while dollar-share trends strengthened across most priority categories.
Segment operating profit fell 15% to $478.6 million, both as reported and in constant currency. Lower volume and higher input costs weighed on profitability, partly offset by favorable net price realization and mix, as well as lower SG&A expenses.
North America Pet sales were essentially flat at $612.8 million. Cat food sales increased at a double-digit rate and pet treats grew at a low-single-digit rate, while dog food sales declined at a high-single-digit rate. Organic net sales were flat and exceeded all-channel retail sales growth by about 1 point, aided by an extra month of Whitebridge Pet Brands results following the alignment of its calendar with General Mills' August fiscal quarter end.
Retailer inventory changes remained a modest headwind. General Mills continues to expect retailer inventory, including changes in customer mix, to create a low-single-digit drag on full-year organic net sales for the Pet segment. Operating profit declined 12% to $99.5 million, reflecting higher input costs, lower volume and increased SG&A expenses, partly offset by favorable pricing and mix.
North America Foodservice sales increased 1% to $523.1 million despite a 2-point headwind from the U.S. yogurt divestiture. Organic net sales advanced 4%, led by growth in cereal and frozen meals. The segment held or gained market share across all of its priority businesses.
Foodservice operating profit rose 12% to $79.4 million, supported by favorable net price realization and mix, partially offset by higher input costs.
International sales grew 4% to $794.3 million, including a 1-point benefit from foreign currency exchange. Organic net sales also increased 4%, driven by growth in distributor markets, India and China.
International operating profit increased 14% to $75.2 million, or 15% in constant currency. Higher volume and lower input costs supported the improvement, partly offset by unfavorable pricing and mix and a double-digit increase in media investment.
GIS’ Financial Health Snapshot & Other Developments
The company ended the quarter with $433.1 million in cash and cash equivalents, $12,367.2 million in long-term debt and $7,450.4 million in stockholders' equity.
Cash provided by operating activities totaled $297.8 million, down from $397 million a year earlier. Capital investments were $90.5 million, compared with $109.5 million in the prior-year quarter.
General Mills paid $330.5 million in dividends and did not repurchase shares.
GIS Reaffirms Fiscal 2027 Outlook
General Mills reaffirmed fiscal 2027 organic net sales growth of down 1.5% to up 0.5%. Adjusted operating profit is expected to be down 8-13% in constant currency, while adjusted earnings are projected at $3-$3.20 per share. Free cash flow conversion is expected to be approximately 95% of adjusted after-tax earnings.
The company continues to target at least $750 million of savings from Holistic Margin Management, its global transformation initiative and other cost actions. It also expects roughly 9 points of operating-profit headwind and 11 points of earnings-per-share headwind from lapping the 53rd week, normalizing incentive expense and fiscal 2026 divestitures. The net impact of divestitures, foreign exchange and the 53rd week is expected to reduce reported sales growth by about 4%.
This Zacks Rank #3 (Hold) company’s shares have gained 1.8% in the past three months compared with the industry’s growth of 0.9%.
Image Source: Zacks Investment Research
Stocks to Consider
The Chefs' Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. At present, CHEF flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Chefs' Warehouse’s current fiscal-year sales and earnings implies growth of 10.6% and 33.7%, respectively, from the year-ago reported figures. Chefs' Warehouse delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Luckin Coffee Inc. (LKNCY - Free Report) offers retail services of freshly brewed drinks and pre-made food and beverage items in the People's Republic of China. The company currently sports a Zacks Rank of 1. LKNCY delivered a trailing four-quarter earnings surprise of 6.6%, on average.
The Zacks Consensus Estimate for Luckin Coffee’s current financial-year sales and earnings indicates growth of 33.3% and 40.8%, respectively, from the prior-year reported levels.
Utz Brands (UTZ - Free Report) engages in the manufacture, marketing and distribution of snack foods in the United States and presently carries a Zacks Rank of 2 (Buy). UTZ delivered a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year sales indicates growth of 3.7% from the year-ago numbers.