A month has gone by since the last earnings report for General Mills (GIS). Shares have added about 0.5% 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 its most recent earnings report in order to get a better handle on the important drivers.

General Mills Q3 Earnings Top Estimates, Sales Down Y/Y

General Mills posted third-quarter fiscal 2024 results, with the bottom line surpassing the Zacks Consensus Estimate and increasing year over year. The top line surpassed the consensus mark but declined from the year-ago quarter’s level. Management reaffirmed its fiscal 2024 guidance.

General Mills posted adjusted earnings of $1.17 per share, surpassing the Zacks Consensus Estimate of $1.04. The bottom line rose 22% year over year on a constant-currency (cc) basis. The upside can be attributed to increased adjusted operating profit, reduced net shares outstanding and reduced taxes. These were somewhat offset by increased net interest expenses.

GIS reported net sales of $5,099.2 million, surpassing the Zacks Consensus Estimate of $4,954.3 million. However, the top line inched down 1% from the year-ago quarter’s figure due to reduced pound volume. This was somewhat offset by positive net price realization and mix. Organic net sales also dropped 1%.

The adjusted gross margin expanded 20 basis points (bps) to 34%. The upside can be attributed to Holistic Margin Management (HMM) cost savings and positive net price realization and mix. These were somewhat offset by input cost inflation, increased other supply chain costs and supply chain deleverage. Our estimate for the adjusted gross margin was pegged at 34.1%, up 30 bps in the reported quarter.

Adjusted operating profit came in at $914 million, up 14% at cc on the back of reduced compensation and benefit expenses. Adjusted operating profit margin expanded 220 bps to 17.9%. Our estimate for the adjusted operating profit margin was pegged at 16.8%, up 110 bps in the reported quarter.

North America Retail: Revenues in the segment came in at $3,242.1 million, unchanged year over year. Positive net price realization and the mix were offset by reduced pound volume. Organic net sales also remained unchanged year over year. The segment’s operating profit declined by 4% to $752.2 million.

International: Revenues in the segment came in at $680.1 million, down 3% year over year, thanks to lower pound volume. Organic net sales also fell 3% due to softness across China and Brazil. The segment’s operating profit slumped 57% to $18.2 million.

Pet: Revenues came in at $624.5 million, down 3% year over year. Revenues were hurt by reduced pound volume. A positive net price realization and mix offered respite. Segmental organic sales also declined 3%. The segment’s operating profit came in at $128.3 million, up 25% on a year-over-year basis.

North America Foodservice: Revenues came in at $551.7 million, up 1% year over year. Also, organic net sales improved 1% from the year-ago quarter’s level. The segment’s operating profit inched down 1% to $81.7 million due to increased other supply chain costs and SG&A expenses.



Other Financial Aspects & Guidance

General Mills ended the quarter with cash and cash equivalents of $588.6 million, long-term debt of $11,015.1 million and total shareholders’ equity of $9,691.3 million. GIS generated $2,438.9 million in cash from operating activities in the nine months ended Feb 25, 2024. Capital investments amounted to $486 million during the same period. The company paid out dividends worth $1 billion and bought nearly 23.5 million shares for $1.6 billion in the nine-month period.

Constant-currency sales from the joint ventures of Cereal Partners Worldwide increased 11%. In Haagen-Dazs Japan, sales went down 2% year over year at cc from the prior year’s figure.

General Mills expects that the biggest factors impacting its performance in the fiscal 2024 are likely to be consumers’ economic status, the moderating rate of cost inflation and the rising stability of supply-chain status. For the fiscal 2024, organic net sales are anticipated to be down 1% to flat year over year. The adjusted operating profit growth at cc is anticipated at 4-5%. Management anticipates adjusted earnings per share (EPS) growth of 4% and 5% at cc. The company envisions a free cash flow conversion of at least 95% of adjusted after-tax earnings.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -10.45% due to these changes.

VGM Scores

Currently, General Mills has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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. Notably, General Mills has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

General Mills belongs to the Zacks Food - Miscellaneous industry. Another stock from the same industry, Campbell Soup (CPB), has gained 1.1% over the past month. More than a month has passed since the company reported results for the quarter ended January 2024.

Campbell reported revenues of $2.46 billion in the last reported quarter, representing a year-over-year change of -1.2%. EPS of $0.80 for the same period compares with $0.80 a year ago.

For the current quarter, Campbell is expected to post earnings of $0.70 per share, indicating a change of +2.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.3% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Campbell. Also, the stock has a VGM Score of B.

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