General Mills Inc. (GIS, Financial) – the U.S. international producer and marketer of branded consumer foods that are sold through retail stores – released the financial results for the fourth quarter of fiscal 2017 and for the fiscal year June 28.
The company has a portfolio that is composed of more than 89 popular brands that are sold in North America. Just to mention some: Betty Crocker, Yoplait, Colombo, Totino's, Pillsbury, Annie's Homegrown, Old El Paso, Cheerios, Cocoa Puffs and many others.
General Mills closed the fourth quarter of fiscal 2017 reporting an EPS – adjusted to one-time charges – of 73 cents on a diluted basis. In constant currency, this figure represents a 14% increase on a year-over-year basis. The company beat analysts’ expectations on fourth quarter adjusted EPS by 2 cents; the analysts forecasted that General Mills would generate an EPS of 71 cents on average.
For full fiscal 2017, the company generated an EPS – adjusted to one-time charges – of $3.08 on a diluted basis, a nearly 6% increase from the same item of full fiscal 2016 according to a constant currency.
Earnings for the fourth quarter of fiscal 2017 and for the entire year are backed by the following figures of revenue that came in at the end of each reporting period.
General Mills invoiced customers for $3.81 billion in the quarter in question and for $15.619 billion for full fiscal 2017. The figure of quarterly revenue represents a 3.1% decline on a year-over-year basis while the figure of yearly unaudited revenue speaks for a 5.7% increase from the prior year’s revenue figure of $16.563 billion. The company beats analysts’ expectations on fourth-quarter 2017 revenue by $60 million.
General Mills’ fourth quarter 2017 revenues are shared among the company’s segments according to the following percentages: North America Retail with 62.8% or $2.392 billion (-3.4% decline year over year); Convenience Stores & Foodservice with 20.4% or $487.7 million (+0.2% year over year); Europe & Australia with 20.3% or $486.5 million (-14.2% year over year) and Asia & Latin America with 18.40% or $440.3 million (+10.4% year over year).
In the fourth quarter of 2017, the company also reported a 3% decline on a year-over-year basis in organic net sales. This was mainly due to reductions in the volumes in the North America Retail segment (-8 points year over year) and Europe & Australia segment (-16 points year over year).
For the quarter in question the company reported an operating profit for the total segment of $672.8 million, a 2.8% increase from the same item of one year ago, and shared among the company’s segments as follows: North America Retail with 75% or $507.7 million (+9.1% year over year); Convenience Stores & Foodservice with 15.7% or $105.8 million (+0.1% year over year); Europe & Australia with 5.5% or $37 million (-34.4% year over year); Asia & Latin America with 3.3% or $22.3 million (-17.1% year over year).
The company’s gross margin – calculated as General Mills' total revenues minus the cost of goods sold, divided by the total figure of sales revenue and adjusted to certain items that affect the comparability – improved by 70 basis points from 34.4% in the fourth quarter of 2016 to 35.1% in the fourth quarter of 2017.
The operating profit margin – adjusted to items that can affect the comparability on a year-over-year basis – also improved by 220 basis points from 14.6% in the fourth quarter of 2016 to 16.8% in fourth quarter of 2017 thanks to the aforementioned improvement in the adjusted gross margin and to an 11% decline on a year-over-year basis in the SG&A expenses.
A look at General Mills’ balance sheet as of the fourth quarter of fiscal 2017 gives the following figures:
- $766.1 million in cash on hand and securities or $1.33 per share.
- A total current ratio of 0.76.
- A total debt (mrq) of $8.25 billion for a total debt/equity (mrq) of 176.02.
GuruFocus gives General Mills a financial strength of 4 out of 10.
The company returned to shareholders $2.7 billion in cash in 2017 while the total amount of cash General Mills returned to its shareholders was $1.5 billion in 2016.
General Mills increased the dividend that it pays to its shareholders from a quarterly 48 cents to a quarterly 49 cents. This quarter payment of 49 cents leads to an annual dividend of $1.96 for a dividend yield of 3.46% according to the current share price of $56.75.
The next quarterly dividend will be paid by General Mills on Aug. 1 to shareholders of record July 10.
General Mills has a market capitalization of $32.61 billion, a price-earnings (P/E) ratio of 20.97, a price-book ratio (P/B) ratio of 8.02 and a price-sales (P/S) ratio of 2.07. The 52-week range is between $55.51 and $72.95.
The forward P/E ratio is 17.69, and the forecasted EPS for full year 2018 is $3.2 on average. Both analysts’ estimates lead to a value of $55.81 per share which is only 1.6% lower than the current market valuation.
The average target price per share is $59.06, and the recommendation rating for General Mills is 3.2 out of 5.
During the Jan. 1 to March 31 period, Joel Greenblatt increased his position in General Mills by 54.70% to 275,006 shares held. Mario Gabelli (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) decreased their positions by 3.03% to 2,250,115 and by 11.43% to 6,948 shares of General Mills held.
Disclosure: I have no positions in General Mills Inc.
