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Alberto Abaterusso
Alberto Abaterusso
Articles (1709) 

General Mills Publishes 1st-Quarter Results

The US packaged foods company beats analysts on earnings but misses on revenue

September 19, 2019 | About:

Shares of General Mills Inc. (NYSE:GIS) were down 0.91% to $54.53 at close on Wednesday despite beating estimates on first-quarter fiscal 2020 GAAP earnings per share by 8 cents.

The Minneapolis-based manufacturer and marketer of branded consumer foods worldwide posted GAAP earnings per diluted share of 85 cents, up 30.8% from the year-ago quarter. Revenue was $4 billion, reflecting 2.2% deterioration year-over-year. Revenue fell $80 million short of expectations.

Organic net sales decreased 1% due to lower organic sales volume.

In the quarter, General Mills reported sales declines in Convenience Stores & Foodservice, Europe & Australia and Asia & Latin America segments as a result of lower volumes.

The North America Retail segment was flat. In contrast, the pet segment gained 7% thanks to favorable net price realization and mix as well as volume growth.

“We are making clear progress in becoming a nimbler, more consumer-connected General Mills,” Chairman and CEO Jeff Harmening said. “Our first-quarter net sales performance included encouraging improvement in North America Retail and strong growth in Pet, driven by good innovation and effective brand-building investment. We got off to a slower start in our other segments, and we’re taking actions to drive topline improvement for those segments and the company starting in the second quarter.”

Further, General Mills recorded a 160-basis-point expansion in adjusted gross margin of 35.2% and a 130-basis-point improvement in adjusted operating profit margin of 17%. Helped by higher operating income and lower fiscal and financial burden, attributable net earnings went up 33% to $521 million.

Looking ahead to full fiscal 2020, the company projects 1-2% growth in organic net sales and about 1% growth in net sales. On a constant currency basis, adjusted operating margin is anticipated to increase approximately 2-4% and adjusted earnings per share to range between $3.32 and $3.38 versus the average estimate of $3.36. In addition, General Mills expects to make 95% in free cash flow out of adjusted after-tax earnings in full fiscal 2020.

The balance sheet had $505 million in cash on hand and $1.7 billion in total inventories as of Aug. 25. Debt totaled $13 billion and total equity was worth $7.7 billion.

On Aug. 1, General Mills paid a 49-cent cash quarterly dividend per common share to its shareholders, generating 3.56% forward dividend yield according to the share price at close on Wednesday. The industry has a median of 2.26% for forward dividend yield, and the S&P 500 index yields 1.87% as of Wednesday.

The share price rose 40% so far this year for a market capitalization of $32.91 billion.

The 52-week range is $36.42 to $56.4.

Wall Street recommends holding shares of General Mills Inc. The average target price is $54.31.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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