Post Earnings Coverage as General Mills’ Quarterly Adjusted EPS Grew 11%

Upcoming AWS Coverage on McCormick & Co. Post-Earnings Results

LONDON, UK / ACCESSWIRE / March 30, 2017 / Active Wall St. announces its post-earnings coverage on General Mills, Inc. (NYSE: GIS). The Company released its third quarter fiscal 2017 results on March 21, 2017. The maker of Cheerios breakfast cereal reported earnings that surpassed market estimates. Register with us now for your free membership at:

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One of General Mills’ competitors within the Processed & Packaged Goods space, McCormick & Co., Inc. (NYSE: MKC), announced on March 13, 2017, that it will conduct a conference call and webcast of its Q12017 financial results on Tuesday, March 28, 2017, at 8:00 a.m. ET. AWS will be initiating a research report on McCormick & Co. in the coming days.

Today, AWS is promoting its earnings coverage on GIS; touching on MKC. Get our free coverage by signing up to:

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Earnings Reviewed

For the third quarter ended February 26, 2017, General Mills’ reported net sales declined 5% to $3.79 billion compared to net sales of $4.00 billion in Q3 FY16. The Company’s Organic net sales also declined 5%, primarily reflecting volume reductions in the North America Retail segment, partially offset by benefits from positive net price realization and mix. The Company’s revenue numbers lagged behind analysts’ consensus of $3.82 billion.

For Q3 FY17, General Mills’ gross margin increased 60 basis points to 34.5% of net sales, reflecting benefits from cost-savings initiatives and favorable mark-to-market effects. The Company’s adjusted gross margin, which excludes certain items affecting comparability, increased 20 basis points to 35.0%, driven by cost-savings efforts more than offsetting the impact of volume deleverage and modest input cost inflation.

During Q3 FY17, General Mills’ operating profit totaled $542 million, down 7% from year-ago levels due to higher restructuring charges related to the recent global reorganization. The Company’s adjusted operating profit margin increased 100 basis points to 16.9%, reflecting higher gross margins, lower administrative expense, and an 8% reduction in media and advertising expense.

Net earnings attributable to General Mills totaled $357.8 million, or $0.61 per diluted share, compared to net earnings of $361.7 million, or $0.59 per diluted share. The Company’s diluted share increased 3%, driven by a lower tax rate and 3% fewer average diluted shares outstanding. The Company’s adjusted diluted EPS, totaled $0.72 in the reported quarter, up 11% on a y-o-y basis. General Mills’ earnings surpassed Wall Street’s expectations of $0.71 per share.

Segment Results

North America Retail Segment

For Q3 FY17, net sales for General Mills’ North America Retail segment totaled $2.50 billion, down 7% on a y-o-y basis, driven primarily by double-digit declines in the US Meals & Baking and US Yogurt operating units. The segment’s operating profit of $517 million was down 7% to lower volumes partially offset by benefits from cost savings initiatives.

Convenience Stores & Foodservice Segment

Net sales for General Mills’ Convenience Stores & Foodservice segment declined 1% to $448 million in Q3 FY17, with declines on certain frozen dough products partially offset by growth for the Focus 6 platforms, including cereal, biscuits, and yogurt. The segment’s operating profit increased 3% to $94 million in the reported quarter, reflecting benefits from cost savings initiatives and lower input costs.

Europe & Australia Segment

For Q3 FY17, net sales for General Mills’ Europe & Australia segment totaled $424 million, down 3% on a y-o-y basis, driven by unfavorable foreign currency exchange offsetting growth in Häagen-Dazs ice cream, Old El Paso Mexican products, and Nature Valley snacks. The segment’s operating profit of $42 million surged 25% on reported basis and 39% on constant currency, reflecting favorable mix and benefits from cost savings initiatives, partially offset by input cost inflation.

Asia & Latin America Segment

Net sales for General Mills’ Asia & Latin America segment totaled $421 million in Q3 FY17 essentially matching year-ago results. Favorable foreign currency exchange and growth in Häagen-Dazs ice cream were offset by the restructuring of the snacks business in China, the net impact of divestitures and acquisitions in FY16, and declines in Latin America driven by macro-economic challenges. The segment’s operating profit increased to $10 million from $2.5 million a year ago, reflecting benefits from currency-driven deflation on raw materials imported into certain markets, as well as the impact of divestitures in FY16.

Joint Venture Summary

During Q3 FY17, combined after-tax earnings from the Cereal Partners Worldwide (CPW) and Häagen-Dazs Japan (HDJ) joint ventures totaled $11 million, down 32% on a y-o-y basis primarily to an asset write-off for CPW and lower volume for HDJ. On a constant-currency basis, after-tax earnings from joint ventures declined 35%. Third-quarter net sales for CPW grew 4% in constant currency, and constant-currency net sales for HDJ declined 5%.

Other Income Statement Items

General Mills’ unallocated corporate items totaled $42 million net expense in Q3 FY17 compared to $78 million net expense in 2016. Excluding mark-to-market valuation effects and other items affecting comparability, unallocated corporate items totaled $22 million net expense in the reported quarter compared to $44 million net expense a year ago.

For Q3 FY17, restructuring, impairment, and other exit costs totaled $78 million compared to $17 million a year ago. An additional $28 million of restructuring and project-related charges were recorded in cost of sales during the reported quarter compared to $27 million a year ago

Cash Flow Generation and Cash Returns

General Mills’ cash provided by operating activities totaled $1.56 billion through nine months, down 16% from the prior year due to changes in trade and advertising accruals driven by reduced spending and changes in income taxes payable related to the North American Green Giant’s divestiture in FY16. Capital investments through the first nine months totaled $475 million. The Company’s dividends paid year-to-date increased 8% to $856 million. During the first nine months of 2017, General Mills repurchased 25.4 million shares of common stock for a total of $1.65 billion.

Outlook

For FY17, General Mills is forecasting organic net sales to decline approximately 4%. The Company’s constant-currency total segment’s operating profit growth is expected to be in a range of down 1% to up 1%. General Mills’ constant-currency adjusted diluted EPS is expected to increase 5 to 7% on a y-o-y basis.

Stock Performance

At the close of trading session on Wednesday, March 29, 2017, General Mills’ stock price was marginally up 0.73% to end the day at $59.44. A total volume of 2.50 million shares were exchanged during the session. The Company’s shares are trading at a PE ratio of 22.03 and have a dividend yield of 3.23%. In addition, the stock currently has a market cap of $34.37 billion.

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