General Mills Inc. (GIS, Financial) released its fourth-quarter earnings on June 26 before the market opened. While earnings edged past estimates, revenue fell short of expectations.
By the numbers
The Cheerios maker posted diluted earnings of 94 cents per share in the fourth quarter, up 59% from the same period last year. Adjusted earnings of 83 cents per share grew 6% from the prior-year quarter.
Net sales amounted to $4.16 billion, reflecting 7% growth from the year-ago period thanks to the acquisition of Blue Buffalo. Organic net sales fell 1% year over year.
Operating profit came in at $716 million, up 34% on the back of lower restructuring, impairment and other exit costs and the addition of Blue Buffalo, which more than compensated for the lower gross margin. The operating profit margin was 17.2%.
The Minneapolis-based manufacturer of packaged foods’ adjusted gross margin, barring certain items affecting comparability, was 35.3%, down 50 basis points on account of mounting input costs.
Segment details
The company's North American retail segment recorded net sales of $2.34 billion in the fourth quarter, down 2% from the same period last year. General Mills attributed the decline to decreasing demand in its U.S. snacks business. Operating profit amounted to $527.7 million, down 2.8%.
Sales in the convenience stores and foodservice division totalled $519 million, up 2%. The operating profit stood at $116.1 million, down 0.8% year over year.
Sales in Europe and Australia came in at $499.5 million, reflecting a 10% decline year over year. Sales in the Asia and Latin America segment fell 9% to $395.9 million.
Mounting costs a concern
The company incurred huge costs during the quarter and expects the trend to continue throughout the year, especially packaging, shipment and raw material costs.
Financial forecast
General Mills is projecting organic net sales will grow 1% to 2% in fiscal 2020. The company also guided for adjusted earnings per share growth between 3% and 5%.
“In fiscal 2020, our plans include continued strong innovation and investments in capabilities and brand building to accelerate our topline growth, efficiency initiatives to maintain our strong margins, and a disciplined focus on cash to further reduce our leverage,” CEO Jeffrey L. Harmening said. “We remain confident that executing our Consumer First strategy and our Compete, Accelerate, and Reshape growth framework will drive sustainable, profitable growth and attractive long-term returns for our shareholders.”
Disclosure: I do not hold any positions in the stocks mentioned.
Read more here:
- What Investors Need to Know About FedEx's 4th-Quarter Earnings
- Lennar's 2nd-Quarter Earnings Rise on Improving Home Market
- CarMax Posts Stronger-Than-Expected 1st-Quarter Earnings
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
