General Mills, Inc. (GIS) on Q3 2022 Results - Earnings Call Transcript
Operator: Greetings, and welcome to the General Mills Third Quarter Fiscal 2022 Earnings Q&A Webcast. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference is being recorded on Wednesday, March 23, 2022. I would now like to turn the conference over to Mr. Jeff Siemon. Please go ahead. Jeff Siemon: Thank you, Frank, and good morning, everyone. Thanks for joining us today for our Q&A session on third quarter results. I hope everyone had time to review our press release, listen to our prepared remarks, and view our presentation materials, which were made available this morning on our Investor Relations website. As a reminder, beginning this quarter, we are reporting results under a new segment structure. You can find supplementary information on our website that shows our historical net sales and segment operating profit results recast for this new segment structure. I'll also remind you that in our Q&A session, we may make forward-looking statements that are based on management's current views and assumptions. Please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which may be discussed on today's call. Joining me this morning are Jeff Harmening, our Chairman and CEO; Kofi Bruce, our CFO; and Jon Nudi, Group President of our North America Retail segment. Let's go ahead and get to the first question. Frank, could you get us started, please? Operator: . Our first question comes from Andrew Lazar with Barclays. Please proceed. Andrew Lazar: So, Jeff, maybe if we put aside General Mills’ comments from CAGNY around sort of 3Q expectations and such, I guess the bottom-line is the company has still raised its full year outlook above where that initial sort of set of company forecasts were prior to the start of 3Q despite a very tough environment. So I guess a twofold question on that. First, what do you think enabled that? Because I think there has been still ample industry skepticism around the industry's ability to sort of deal with the current environment as it is. And then more importantly, I know you're not going to give sort of detailed guidance for next year until next quarter. But do you think this dynamic of managing through this can hold as you move through fiscal '23? Because the concern I hear from many investors really is that the industry is just sort of kicking the can down the road so to speak about when the impact of certain things like costs, particularly in light of recent global events will ultimately catch up to the group. That would be my questions. Thank you. Jeff Harmening: So, Andrew, as I think about this year, I mean importantly, we ended the Q3 with momentum and the reason we headed with momentum is because our service levels improved. And as a result, our volume approved more than we had thought, even before we were going into CAGNY. And as we look at the fourth quarter this year, I think it's important to realize we're still going to have inflation. In fact, inflation in the fourth quarter will be higher. My pricing will also be higher in the fourth quarter. And in line, Q3, our inflation and pricing was in line with what we'd expected. And so we feel as if we have a good handle on both those items. And then -- so then what's really driving the improvement in the fourth quarter is just a little bit better volume than what we had anticipated, given service levels a little bit higher. We're also seeing -- a lot has been made of elasticities. I mean, it's a pretty benign elasticity environment right now, which is not to say there's no elasticity. Certainly as prices go up, there will be some level of elasticity, but it's also important to note that it's not in line with historical elasticities given this current environment. And so, our raise on the fourth quarter really is confidence in our underlying assumptions around inflation and pricing. We are, as we said, mostly hedged on commodities through the calendar year, which obviously includes the fourth quarter. And inflation and pricing, we saw the pricing we thought we would get through. And so, it really has increased confidence in our ability to service the business in the fourth quarter. Now our service levels won't be as they have historically been. So we're not anticipating getting all the way back to that. As we look at '23, I mean, it's a pretty volatile environment. And so, usually as you well know, Andrew, we don't comment even on hedging. We don't comment on past and current fiscal year, but these are unusual times. And so we thought we'd give a little bit of color into what we have hedged through the calendar year. And what our hedging does is, it mostly buys us time, and we'll have inflation in fiscal '22. Though we'll have a significant inflation in fiscal '23, it just won't be at the level of spot prices at least in the calendar year you're seeing now in the market. Operator: Our next question comes from Ken Goldman with JP Morgan. Please proceed. Ken Goldman : I wanted to just ask specifically on pet for the margin. I think dropped to its lowest level since you brought Blue Buffalo. Can you talk a little bit about what caused the pressure in terms of input costs? And I assume that those are here to stay for a while. I think you also mentioned higher SG&A. So I'm just curious, how do you think about the potential for pricing to start offsetting some of these headwinds? When do you expect sort of the bottom in that margin to be reached? Just trying to get a little bit of a better sense for how to view that progression? Kofi Bruce : Ken, I'll take that. This is Kofi. Thanks for the question. So one of the important things to also think about here is the impact of pet brands on the pet margins. So that is dilutive to the margins this year. There's some specific one-time charges related to purchase accounting flowing through in the -- weighing on the margins as well. So we expect as we both bring that more fully into our production system and get it online for HMM that we'll see those margins improve on the pet brands business and -- on the acquired brands, excuse me. And then as we step forward, we expect a gap between inflation and pricing to close. So pet will be a meaningful contributor to the pricing step up we expect in Q4. Operator: Our next question comes from Michael Lavery with Piper Sandler. Michael Lavery : I appreciate just even a little peek under the tent for fiscal '23. I guess maybe I'm pushing our luck here, but would love just to know when you say you've got some coverage through calendar '22, it still noted that there's significant inflation, would that -- if things are where they sit now, if that holds, would that be an acceleration in inflation or does the coverage give any moderation? Maybe just order of magnitude what you're seeing as far a little bit of a further look ahead? Jeff Harmening: Yes, Michael, thanks for the question. And yes, you might be pushing your luck a little bit. I think it's fair to say. We expect the inflation to be significant. I wouldn't want to go much further than that. And I think our expectation at this point in the year would be -- a normal policy would be to be about 50% hedged, which is the perspective I give on why we guided you to calendar 2022. So the goal here is to buy ourselves the time to get actions aligned up in the market, and frankly, to give ourselves time to read whether or not we see the inflation as being structural. Michael Lavery : Maybe just a follow -up, on the service levels for pizza and dough and snack, you said you kind of really pushed to get more out the door in the last couple of weeks of the quarter, short period of time, but your margin performance was still quite good in North America Retail relatively speaking with fairly modest sequential and year-over-year declines compared to what we've been seeing. Was it just the pricing that really drove that and obviously it was significant? Or is there some other things going on that are just good to keep in mind for how we think about your momentum and margin outlook in that segment? Kofi Bruce: Yes, I'll start. And then I'll ask Jon to provide any fillers if I missed anything. So I think you got it mostly right. So we saw pricing actions come-in in the quarter probably towards the middle to tail end of the quarter. So as we go forward, we'd expect that to be a meaningful step up in this segment as well as a meaningful contributor therefore to the step up for the total company. On top of that, as Jeff referenced in his comments on the first question, we expect service levels to reform closer to in line with what they had been trending prior to the quarter. So I think the combination of those two things is what gives us a good portion of a confidence that drove our guidance rate. Jon Nudi: Yes, I think that's exactly right. So again, pricing and service are the two big things that we are focused on across our end. Maybe I'll spend just a minute to go a little bit deeper on service. Obviously, that's been a big challenge for us this year and it's really evolved as well. At the beginning of the year, it's really about our distribution centers and logistics bottlenecks. We have done a nice job at staffing distribution centers up and feel good about our ability to move product now. The biggest issue we’re seeing is really around materials selection. So, ingredients coming into our plants to run our products. In Q3, it was particularly challenging, particularly in RBG, pizza and hot snacks, so things like fats and oils and starch and packaging. So we spent a lot of time really working as a team to improve on those platforms. We've seen an improvement in our case fill and on-shelf availability, but our service levels are still quite a bit below historical levels. We trade 98% to 99%. We were in the 70s overall for Q3. We expect to get better but not near historical levels. We expect to be in the 80s as we go into Q4. So we've taken lots of actions, really proud of the team. Supply chain team is doing the elements work, and it's really one business team working together. And we've pulled many levers. We started up control towers daily at the working team level. At the senior level, we're meeting once a week on RBG and hot snacks or other constrained platforms to make sure that we're removing hurdles or at the senior level getting on the phone with suppliers, at senior levels to make sure that we prioritize for ingredients. We've adjusted formulations. In some of our products, we've reformulated over 20 times year-to-date. Every time you make an ingredient change, you have to change the formulation, which is obviously a lot of work by our teams. We just did freight lanes as well pretty significantly to make sure that we can get to our customers on time. We've added capacity on things like OEP, fruit, cereal, potatoes. We're adding ESC. So we're spending a good chunk of our time making sure that we service our business. We did better, I think, as we entered this quarter. We've got a lot more work to do, and we'll stay very focused on that. Operator: Our next question comes from Robert Moskow with Credit Suisse. Robert Moskow: Just a couple of quick ones. Jeff, can you talk a little bit about your plans for capacity expansion in this calendar year? I believe you're adding more in refrigerated dough. I wanted some more specifics there and see if there's any other categories that you've been expanded. And then secondly, I want to know in the flour milling grain merchandising business, do you expect any kind of benefits from dislocation in the grain markets? Jeff Harmening : So Rob, on the 2 questions, in terms of capacity expansion, I probably won't go product line by product line. However, I do appreciate the question. And what I will say is that we are certainly willing and will be spending capital to expand capacity on a few of our lines in the coming year. And really, the businesses are -- that we'll spend money on are the ones that performed well pre-pandemic and continue to have momentum during the pandemic, and there are actually a number of those. And so what you'll see in the coming year is that we will expand capacity on several of our major businesses. We'll probably give an update at the end of the year on where we intend to do that. But your question is a fair one and just know that we do -- our first call on capital is investing in our current business. We have momentum on a number of businesses that we had pre-pandemic and we have during the pandemic. In terms of the question about flour milling and dislocations, I mean, I don't know that we're going to see any benefits. Having said that, I think we'll have full supply on our grain milling businesses. We're world-class in that. We've been milling flour since 1866, so we have a pretty long history of being able to do that effectively. Operator: Our next question comes from Steve Powers from Deutsche Bank. Steve Powers: You -- I guess you performed well on HMM cost savings despite the supply constraints that you've been talking about. And I guess I'm curious just to what degree you think that HMM cost savings momentum continue, but may actually be able to accelerate to some degree as those supply constraints abate and you're able to focus more on so-called business-as-usual conditions, hopefully, into the new year. Just some commentary around HMM would be great. Kofi Bruce: Appreciate the question, and I'd love for business-as-usual conditions tomorrow if you've got that in your powers. So I think our expectation is HMM is a core capability for us. And we've been at it as a disciplined really since the start of -- close to the start of this century. We've been pretty consistent in delivering mid-single-digit COGS productivity off of it. I don't have any concerns about our ability to keep doing that. What I would expect is that if we -- if and when -- or when, I should say, we get to, and it's hard to say when that is, when we get to more stable conditions that we'll be in a position that HMM will be the lever that allows us to shed a lot of the operating costs that we put on in this environment due to disruption. And so what that will do is allow us to bring our margins -- our gross margins back up as a result of the SRM actions that we've taken in this environment to deal with the extraordinary inflation. Steve Powers: If I could, just on a fully different tact, just on pet. I'd love your perspective on how you expect the category broadly, I mean your brands specifically, but the category broadly, high-end, premium pet care, pet food to hold up if we enter a more adverse consumer environment. Just how you think that category has evolved and solidified itself to be able to persevere through a cycle? Jeff Harmening : Yes. Steve, this is -- it's -- we anticipate the category will continue to perform well, and we think that our segment will continue to perform quite well. And even through the last recession, which was a long time ago, one of the things before we even bought Blue Buffalo, we look at how the category performed during a recession, and it turns out it performs very well. The last thing you want to do in tough times is sub-optimize what you're going to give your pet. And I would tell you that on top of that, the predominant trend in pet food now, and I think will be going forward, is the humanization of pet food. And we're clearly very well positioned in that area given that we're the #1 natural pet food in the pet category by a long, long way. And so we believe we have the best brand and the best part of a really good segment and a really good category that holds up well during recessions. And by the way, as a result, all those things have very low exposure to private label. Operator: Our next question comes from Bryan Spillane with Bank of America. Bryan Spillane: So my question is around elasticity, and I guess wanted to just get 2 perspectives on it. Jeff, I think in the prepared remarks, you mentioned -- there's a mention about the sort of expectation that this elevated level of demand is -- you expect it to stick. And so is part of that just a function that now given where inflation is, just an expectation that consumers just be eating more at home? So we've kind of shifted from being at home because of COVID to now eating more at home because it's so expensive to go out? And then maybe just a second point, maybe for Jon Nudi, is anything that you're seeing now in terms of like cross-elasticity between channels. So consumers making different choices in terms of maybe avoiding food stores and/or convenience stores or just anything that's going on between channels as we're just watching the pricing set in? I know there's a lot there, but would appreciate. Jon Nudi: Thanks, Bryan. This is Jon. So maybe I'll tackle pricing here, and then I'll get to elasticities in a second. So obviously, I talked about supply chain. Pricing, the other subject, we're spending a lot of time on. We do believe that we're pricing effectively within the market, and for each brand, that looks different. And one of the things I'm really proud of is the SRM capability, our strategic revenue management capability we've built over the last 5 or 6 years under Jeff's leadership. And our SRM plans look different for every brand and really go down to the SKU level. It's an always-on capability. We're looking at what's coming at us from an inflation standpoint. We're looking at what's happening in market. And then we're leveraging the full SRM toolkit. So that's car lot advances, it's trade optimization, tag price architecture and mix. And in the U.S., our measured data or our average unit prices are up a bit more than our categories, and that's really where we want to be. In many cases, we're the leaders in the category. We feel like it's on us to make sure that we have clear pricing strategies. At the end of the day, our goal is to pass as little as needed. But certainly inflation, we need to take pricing at this point to preserve our margins. So we work closely with the retailers. Pricing is never an easy discussion. Everyone is facing inflation, though. So again, we can lock in and provide a good rationale for why we're taking the pricing, and more importantly, a coherent plan for what pricing will look like in market. We've been able to find good acceptance, and more importantly, good reflection in the market. So it's been a big focus area for us. I feel great about what we've done to date. We've got a road map for each of our brands and down to the SKU level for the future as well if more pricing is needed. In terms of elasticity, I mean, Jeff touched on this earlier, I mean, we are seeing elasticity. So again, it's not like we're not. This is not at historical levels. We've seen elasticities remain pretty consistent quarter-to-quarter. So what we saw in Q3 was consistent to Q2. We expect that to be the case in Q4 number. And we're going to have more price/mix in Q4. So we expect to see a bit more elasticity as a result, but again, not back to historical levels. In terms of what's happening and across segments and categories and channels, there's obviously a lot of noise in the data, everything from product availability to consumer mobility to government support levels and significant inflation away-from-home channel. It's really hard to try to parse them out, but we'll continue to try to do that. But again, elasticities remain constant. That's the important thing to remember and not at historical levels as well. Operator: Our next question comes from Alexia Howard with Bernstein. Alexia Howard: Could I ask about marketing and innovation? Obviously, there's so much disruption going on in the industry. You've talked about supply chain issues starting to be resolved. I can imagine there's a lot of fires to put out right now. But on the underlying marketing, it sounded as though SG&A was down this quarter. Does that mean that the marketing spending was down? Is that likely to remain that way until things get easier on the supply chain? And then also on the innovation side, has that also had to be ratcheted back just because of the current state of play out there in the world? Jeff Harmening : Alexia, I really do appreciate that question. This is Jeff. The -- I think the key to remember is that we've gained market share in more than 60% of our categories for 4 years in a row. And there's a reason why we've done that, and that's because we really haven't cut back on marketing spending or our levels of innovation. In fact, our levels of new product innovation have led most of our categories all over the world. And we've actually increased our marketing spending over time. And you can't just turn on and off marketing spending on brands and have those brands be effective, and the same will be true of innovation. So through this whole pandemic, we -- one of the things we see is that companies that come out of rough periods like we have been through, the ones who invest in their brands, whether that's new product innovation or whether that's marketing, are the ones that are successful. With regard to the latest quarter, the reason our SG&A is down, the #1 reason is that our admin costs are down. Our marketing spending is down just a touch, but that really is a reflection of a very short period in time. But broader picture, we've continued to innovate and we've continued our marketing, and that's the reason why we're growing share pretty much everywhere in the world. Operator: Our next question comes from Laurent Grandet with Guggenheim. Laurent Grandet: I'd like to come back a bit on pets and pricing because that's a question I've got from many investors. So first on, what is the price, what is the mix in pet food in the third quarter? What -- if you can really unbundle those 2? And are you seeing pet parents shutting down to smaller pack size as we are seeing from -- for some of the brands? And anything you could share on price elasticity, again, as it's one of the major concern, specifically for that business from investors? And finally, could you please update us on the split between mass retail and e-commerce and pet specialty impact and what are ? Kofi Bruce: Sure. This is Kofi. So I'll start with the front part of the question on price/mix. Just to give you a sense here, we saw about 7 points of price/mix on pet in the quarter. And then our expectation is that we'll see that step up as we go forward into Q4. I think the rest of your question was about the channel split, which we may have to get back to you just to verify. I don't have that at fingertips. Do you have it, Jeff? Jeff Siemon: Yes. I think, Laurent, the -- I mean broadly, the channel splits, we're at about 1/3, 1/3, 1/3 across food, drug and mass, probably a little bit higher in food, drug and mass down, maybe closer to 40%; and then e-commerce and specialty, maybe about 30% each. So in kind of broad terms, that's roughly where we are from a channel. I just wanted to -- it’s actually correct, Kofi’s comment on -- looking at maybe on the reported number. On the -- for pet on an organic basis, price/mix was plus 13% in the quarter. And that's a -- you've got a combination of pricing, which was -- we did have some pricing going to the market in the quarter. So we only have a partial benefit of that in the quarter and then some mix benefit as you heard us talk about at CAGNY, our Tastefuls launch, for instance, on wet cat food on a price per pound basis, as you know, both treats and wet food are advantaged relative to dry, and those are growing faster for us both for Tastefuls as well as from the acquired brands that we've had here recently. Jeff Harmening : And Laurent, you asked a couple of other questions -- more detailed questions. In terms of elasticity, the pet category is relatively inelastic. Even in recessionary periods, it's relatively inelastic. And you asked about pack sizes, one of the things we've seen is that demand has been so strong in the pet category, and we anticipate going forward. The consumers really are buying what they can find in the shelves. And whether that's wet food or whether that's dry food, the availability really is driving consumer acquisition at this point. There's really not a trade down in pack size. It's going to trade off in pack sizes. Really the availability is the key because the category is so strong, and we believe it's going to remain strong. And as we said in our kind of opening remarks, as we look at the fourth quarter, our pricing will catch up to inflation, which will have a positive impact on our pet margins in the fourth quarter. Operator: Our next question comes from Chris Growe with Stifel. Chris Growe: Just had 2 quick questions. The first would just be -- maybe one for Kofi. As we think about this pricing cost dynamic and inflation picks out or it's going to be double digit, I should say, in the fourth quarter. The pricing is accelerating as well. Obviously, that reflects in the guidance. But should we expect the same kind of gross rate of change in gross margin year-over-year, and therefore, should improve sequentially but should be down still year-over-year? Just trying to get some order of magnitude there. And then I had a second question, maybe more for Jon. On the undershipment in North American Retail, you that 3-point gap you called out. Does that quantify the sales shortfall in the quarter from the service issues you had? And I guess also I'm curious about rebuilding inventory. Are you in that -- are you still hoping to do that? And should you be shipping ahead of consumption theoretically to keep up with demand here? Kofi Bruce: Okay. So let me take the first part of your question. I expect the price/mix step up to be meaningful. And obviously, embedding our range, if you do the squeeze on gross margin would be -- is absolutely a sequential improvement and the possibility, obviously, of a gross margin increase year-over-year. Jon Nudi: And on the shipments versus consumption question, Chris, U.S. net sales did lag Nielsen measured retail sales growth by 3 points in the quarter, as you mentioned, really driven by the service issues on RBG, pizza and hot snacks. We don't expect shipments to lag sales in Q4. We also don't expect to rebuild inventories in Q4, and that's really reflected in our guidance. If we can do a bit better and service levels improve, we might be able to rebuild a bit, but likely will push into fiscal '23, where hopefully, we can get back to more historical inventory levels. Operator: Our next question comes from Ken Zaslow with Bank of Montreal. Ken Zaslow: I don't want to go dig a little deeper into the elasticity question. You said that there's been a little bit of elasticity. Is it just similar level across all your categories? Or is there a spectrum of elasticity where certain categories are showing zero elasticity and some categories are showing a greater variability of elasticity? And can you talk about either the spectrum or is it flat? Jon Nudi: Yes. So this is Jon. It's -- for U.S. and for not a long, we competed in over 250 categories. We have had obviously in the U.S. and in our global businesses. And I can tell you, every category is reacting differently. So we are seeing elasticities that vary. There's not a single category that has zero elasticity, though. So when you take price and particularly the levels of pricing that we're seeing due to the heightened inflation, there are elasticities for sure. Again, there are changes between categories. But at this point, we are seeing elasticity in everything. As I mentioned earlier, though, those elasticities are generally holding. So again, they're not increasing. They're not getting towards historical levels. They're holding at lower levels than what we've seen in the past. Ken Zaslow: Okay. And then my second question is on data analytics. Can you talk about the speed to which -- or the real-time data analytics? The idea that the service levels came back quicker is obviously a positive. Was it -- in your understanding, how quick it came back, were you able to understand that came back in real time? Or was there a lag in the understanding of when it actually occurred? And just kind of figuring that out, is the real-time data and your data analytics on real-time data analytics improved, changed or stayed the same? And I'll leave it there. Appreciate it. Jon Nudi: Yes. So related to data analysis on this one, I think was pretty simple. So at the end of the day, we had -- particularly on RBG, pizza and hot snacks, more demand than supply and was really focused on getting as much as we could out of our plants. And the big issue, again, was not so much capacity on those platforms, those getting the ingredients to get our lines running literally 24 hours a day. So as we get towards the end of the quarter, we had put a full court press. Our teams did a great job, and we were able to pump out significantly more volume than what we had originally thought. And we shipped that directly to customers. So again, through our distribution centers in some cases; in some cases, directed to our retailers. And as a result, of that, we were able to see some stronger sales to end the quarter and our -- so again, it really wasn't a data analytics thing. It was more about just our ability to run product. And again, our supply team did a terrific job really significantly improving that situation. Jeff Siemon: We have time for one more Frank. Operator: Our next question comes from Nik Modi with RBC Capital Markets. Nik Modi: Just 2 quick questions on the consumer. You guys talked about at CAGNY about deal prep. So I just wanted to see if you have any more evolved thoughts on that and what you've been seeing. And then, I guess, given what's been happening with inflation and just thinking about the consumer, would you guys agree with the statement that perhaps the low-income consumer is going to maybe go into a quasi-recession sooner rather than later just given what's going on with all the external pressures? Or is that not the way you see it? Jeff Harmening : I guess I would start by saying our -- I think our success is going to be determined by how fast we can pivot, as witnessed by Jon Nudi's latest comment about supply, rather than our ability to predict exactly what's going to happen in the future. I mean -- and I'm not trying to be opaque on purpose. It's just that there are so many moving pieces. We have some people returning back to the office, yet demand will be greater than pre-pandemic levels for quite a while. There is a possibility of a recession, but it's certainly not here yet. There is going to be inflation, but how much that inflation is a couple of quarters from now is yet to be determined. And the state of the consumer and their financial well-being, they're -- consumers are in a good place now. How that can look for 2 quarters from now is difficult to say. And so I think our ability to be successful over the last couple of years has really been predicated on another ability to determine what's going to happen next but our ability to react to what's happened next. And that's what I feel great about. And you'll see that in pet. You see that in North America Retail, you see it all over the world. And so as we think about the future, there are a variety of outcomes that are possible. But I will tell you there's been a variety of outcomes over the last few years, and we've been successful through all of them. And so we're confident that whatever comes at us next, we'll be able to deal with that, at least as well as our competitors, if not perfectly. Jeff Siemon: Great. Frank, I think that's all the time we have today. Appreciate everyone following along, and appreciate the good questions this morning. Please feel free to reach out to the IR team if you have follow-ups today. Otherwise, wish you a good day, and we'll talk next quarter. Operator: Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.
General Mills, Inc. (NYSE:GIS) Q2 2025 Earnings Overview
- Earnings per share (EPS) of $1.40, surpassing estimates and indicating a 12% year-over-year increase.
- Revenue reached approximately $5.24 billion, exceeding expectations.
- Financial metrics reveal a price-to-earnings (P/E) ratio of 13.93 and a debt-to-equity ratio of 1.58, showcasing the company's robust financial health.
General Mills, Inc. (NYSE:GIS) is a leading global food company known for its wide range of products, including cereals, snacks, and pet foods. The company operates in a competitive market alongside other major players like Kellogg's and Nestlé. On December 18, 2024, General Mills reported its Q2 2025 earnings, showcasing strong financial performance.
General Mills reported earnings per share (EPS) of $1.40, surpassing the estimated $1.22. This represents a 12% increase year over year on a constant currency basis, as highlighted by Zacks. The company's revenue also exceeded expectations, reaching approximately $5.24 billion compared to the estimated $5.14 billion. This performance underscores General Mills' robust financial health.
The earnings call featured key executives, including CEO Jeff Harmening and CFO Kofi Bruce, who provided insights into the company's strategic direction. Analysts from major financial institutions attended the call, reflecting the market's interest in General Mills' performance. The call was conducted in a listen-only mode, allowing participants to focus on the company's financial results and future plans.
General Mills' financial metrics provide further insight into its market valuation. The company has a price-to-earnings (P/E) ratio of approximately 13.93, indicating how the market values its earnings. Its price-to-sales ratio is about 1.79, reflecting the market's valuation of its revenue. The enterprise value to sales ratio stands at around 2.40, suggesting how the company's total value compares to its sales.
The company's financial leverage is highlighted by a debt-to-equity ratio of approximately 1.58. This ratio indicates the extent to which General Mills is financing its operations through debt. Additionally, the current ratio of around 0.92 suggests the company's ability to cover its short-term liabilities with its short-term assets. These metrics provide a comprehensive view of General Mills' financial position.
General Mills Beats Q2 Expectations but Lowers Full-Year Profit Forecast
General Mills (NYSE:GIS) delivered stronger-than-expected second-quarter results, with adjusted earnings per share of $1.40 surpassing analyst estimates of $1.22. Revenue rose 2% year-over-year to $5.2 billion, beating the forecasted $5.14 billion. However, despite the solid quarterly performance, shares dipped more than 4% as the company reduced its full-year profit outlook.
The company now anticipates adjusted operating profit to decline 2–4% in constant currency, a revision from its prior guidance of flat to down 2%. The adjustment reflected rising promotional investments and additional challenges expected in the second half of the fiscal year.
While the company achieved progress in key areas, such as accelerating volume growth and returning its North America Pet business to positive growth, the outlook for organic net sales growth in fiscal 2025 narrowed to the lower end of the 0–1% range. Adjusted earnings per share are now projected to decline 1–3% in constant currency, down from the earlier guidance of -1% to +1%.
Second-quarter results were bolstered by temporary factors, including increased retailer inventories, which are expected to reverse in the latter half of the year. Performance varied across segments, with flat sales in North America Retail and a 5% sales increase in the North America Pet business.
Despite progress in several areas, General Mills faces headwinds in maintaining momentum, with the updated guidance reflecting the challenges ahead.
General Mills, Inc. (NYSE:GIS) Quarterly Earnings Insight
- Analysts estimate an EPS of $1.22 and projected revenue of $5.14 billion for the upcoming quarterly earnings.
- There is a keen interest in General Mills' financial performance, with a focus on key metrics beyond just revenue and profit figures.
- Financial ratios such as a P/E ratio of approximately 15.56 and a price-to-sales ratio of about 1.87 provide insights into the company's market valuation.
General Mills, Inc. (NYSE:GIS) is a leading global food company known for its wide range of products, including cereals, snacks, and pet foods. As a major player in the consumer goods sector, it competes with other giants like Kellogg's and Nestlé. The company is set to release its quarterly earnings on December 18, 2024, with analysts estimating an EPS of $1.22 and projected revenue of $5.14 billion.
As highlighted by Benzinga, analysts have been revising their forecasts ahead of the earnings call, indicating a keen interest in General Mills' financial performance. The focus is not just on the typical revenue and profit figures but also on key metrics that could provide deeper insights into the company's operations. This anticipation suggests that the upcoming earnings report could significantly impact the stock's price.
Despite the projected revenue increase, analysts expect a decline in earnings for the quarter ending November 2024. This expectation is crucial for understanding the company's earnings outlook. If General Mills surpasses these estimates, the stock might see an upward movement. Conversely, failing to meet expectations could lead to a decline, making the earnings call a pivotal event for investors.
General Mills' financial ratios provide further context for its valuation. With a P/E ratio of approximately 15.56, investors are willing to pay $15.56 for each dollar of earnings. The price-to-sales ratio of about 1.87 indicates that investors pay $1.87 for every dollar of sales. These metrics help investors gauge the company's market value relative to its earnings and sales.
The company's enterprise value to operating cash flow ratio is around 14.05, offering insight into its valuation compared to cash flow. An earnings yield of about 6.43% provides a perspective on shareholder returns. Additionally, a debt-to-equity ratio of approximately 1.44 highlights the proportion of debt in financing assets. The current ratio of around 0.66 suggests the company's ability to cover short-term liabilities with short-term assets.
General Mills (NYSE:GIS) Price Target Update and Financial Outlook
- Bryan Spillane of Bank of America Securities updates General Mills (NYSE:GIS) price target to $78, indicating a potential increase of about 4.36% from its current price.
- The sale of General Mills' North American Yogurt business is part of a broader strategy to streamline operations, despite causing a minor stock price drop of 0.2%.
- Wall Street forecasts a downturn in performance for the quarter ended August 2024, with earnings per share expected to decrease by 3.7% year over year to $1.05, and revenue projected to fall by 2.5% to $4.78 billion.
Bryan Spillane of Bank of America Securities recently updated the price target for General Mills (NYSE:GIS) to $78, suggesting a potential increase of about 4.36% from its current price of $74.74. This adjustment reflects a positive outlook on the company's financial future. General Mills, a leading global food company, is known for its wide range of products, including cereals, snacks, and yogurt. The company operates in a competitive industry, facing off against other food giants like Kellogg's and PepsiCo.
The anticipation around General Mills' first-quarter earnings is high, especially considering the company's strategic moves and the broader consumer landscape. Analysts are keen to see how General Mills' recent sale of its North American Yogurt business to Lactalis and Sodiaal, announced on September 12, will impact its financials. This sale, which led to a minor drop in stock price by 0.2%, closing at $73.01, is part of the company's broader strategy to streamline its operations and focus on its core brands.
Wall Street forecasts for the quarter ended August 2024 suggest a slight downturn in performance compared to the previous year, with earnings per share expected to decrease by 3.7% year over year to $1.05, and revenue projected to fall by 2.5% to $4.78 billion. These projections come amidst a minor adjustment in the consensus estimate for the company's earnings per share, which saw a downward revision of 0.1% over the last 30 days. This adjustment reflects the analysts' reevaluation of their initial forecasts, indicating a cautious stance on the company's short-term financial outlook.
The significance of these earnings estimate revisions cannot be understated, as they often influence investor reactions to a company's stock. Historical data shows a strong correlation between the direction of earnings estimate revisions and the stock's short-term price movements. As General Mills prepares to release its first-quarter earnings, investors and analysts alike will be closely watching how these factors play out in the company's financial performance.
Ahead of the earnings call, the stock has seen slight fluctuations, trading at $74.625, with a minor change of -0.005%. The stock's performance over the past year, ranging from a low of $60.33 to a high of $75.9, alongside a market capitalization of approximately $41.54 billion, underscores the company's significant presence in the market. With these financial dynamics at play, the upcoming earnings report will be crucial in determining General Mills' trajectory in the competitive food industry landscape.
General Mills, Inc. (NYSE:GIS) Stock Target Price Fluctuations and Analyst Sentiment
- Initial average target price was set at $72.75, later adjusted to $69.00, and recently increased to $71.50.
- Credit Suisse analyst Robert Moskow anticipates General Mills to surpass earnings expectations, setting a specific price target of $68.
- The adjustments in target prices reflect a cautiously optimistic outlook on General Mills' financial health and growth prospects.
General Mills, Inc. (NYSE:GIS), a prominent player in the global food industry, has been navigating the complex landscape of consumer preferences and market dynamics with its diverse product range. Known for its iconic brands like Cheerios and Häagen-Dazs, General Mills has established a strong presence in various segments, including retail and pet food. The company's ability to adapt and innovate has been crucial in maintaining its competitive edge against rivals in the food sector.
The stock target price for General Mills has experienced notable changes over the past year, reflecting the evolving analyst sentiment towards the company. Initially, the average target price was set at $72.75, showcasing a positive outlook. However, this figure was adjusted to $69.00 in the last quarter, indicating a tempered expectation. Recently, there has been a slight uptick to $71.50, suggesting a resurgence of optimism among analysts. This fluctuation in target prices underscores the dynamic nature of market perceptions and the impact of various factors on investor confidence.
Credit Suisse analyst Robert Moskow's recent analysis sheds light on the reasons behind the renewed confidence in General Mills. Moskow anticipates that the company will surpass earnings expectations in its upcoming report, driven by a favorable combination of factors that historically lead to earnings beats. This optimism is further supported by a specific price target of $68 set by Credit Suisse, indicating a belief in the company's strong performance potential. Such analyses play a significant role in shaping the consensus target price and reflect the underlying confidence in General Mills' strategic direction and market positioning.
The anticipation of General Mills exceeding earnings expectations is a testament to the company's strategic initiatives and its ability to navigate market challenges. The analysis by Credit Suisse highlights the importance of understanding the factors that contribute to financial performance, including product mix and market trends. As General Mills prepares for its earnings announcement, investors and stakeholders are closely watching, with the recent adjustments in target prices indicating a cautiously optimistic outlook on the company's financial health and growth prospects.
While the consensus target price for General Mills has seen adjustments over the past year, the underlying factors contributing to these changes are crucial for investors to consider. The company's broad portfolio, strategic market responses, and the potential to surpass earnings expectations are key drivers of analyst sentiment. As General Mills continues to adapt to consumer preferences and market dynamics, the evolving target prices reflect the ongoing assessment of its financial outlook and investment potential.
General Mills Shares Fall on Outlook Cut
General Mills (NYSE:GIS) experienced a more than 2% decline in its shares intra-day today after the company revised its full-year forecast downwards.
In its fiscal second quarter, General Mills reported an adjusted earnings per share (EPS) of $1.25, an improvement from $1.10 in the same period last year and higher than the anticipated $1.15. However, net sales decreased by 1.6% year-over-year to $5.14 billion, falling short of the expected $5.35 billion.
The company now anticipates a slower volume recovery in fiscal 2024. This updated outlook is based on a more conservative consumer economic forecast and a quicker return to normal competitive availability on store shelves.
Consequently, organic net sales projections have been adjusted to a range between -1% and flat, a significant change from the previously estimated growth of 3-4%. This adjustment reflects the expected slower volume recovery in the upcoming fiscal year.
Additionally, General Mills now forecasts adjusted operating profit and adjusted diluted EPS to grow by 4-5% in constant currency, a slight decrease from the previously projected growth range of 4-6% in constant currency.
General Mills Reports Better Than Expected Q1 Earnings Results
General Mills (NYSE:GIS) reported a decline in adjusted earnings for the first quarter, but it still exceeded expectations. This achievement can be attributed to the stabilization of supply chains and the resilience of consumers in the face of inflationary pressures.
In the first quarter, General Mills reported earnings per share (EPS) of $1.09, surpassing the analyst estimate of $1.08. The company's revenue for the quarter reached $4.9 billion, slightly ahead of the Street estimate of $4.89 billion.
Furthermore, General Mills has reaffirmed its outlook for the fiscal year 2024, expressing confidence in driving organic net sales growth through robust marketing, innovation, in-store support, and effective pricing strategies. The company also expects a moderation in the rate of input cost inflation, along with a reduction in disruptions within its supply chains.
General Mills anticipates organic net sales growth of 3 to 4 percent and projects a 4 to 6 percent increase in both adjusted operating profit and adjusted diluted EPS in constant currency.
