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General Mills (GIS) Up 1% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for General Mills (GIS - Free Report) . Shares have added about 1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is General Mills due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
General Mills Q1 Earnings Beat Estimates on Pricing and Mix Benefits
General Mills 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.
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. 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.
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.
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.
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.
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%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, General Mills has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for value investors.
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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, General Mills has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
View the Zacks #1 Rank List
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General Mills (GIS) Up 1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for General Mills (GIS - Free Report) . Shares have added about 1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is General Mills due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
General Mills Q1 Earnings Beat Estimates on Pricing and Mix Benefits
General Mills 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.
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. 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.
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.
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.
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.
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%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, General Mills has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for value investors.
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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, General Mills has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.