General Mills Inc. saw a significant surge in stock prices on Wednesday, March 20, 2024, following the release of its fiscal third-quarter results.
Investors were pleasantly surprised as the consumer-food giant reported a profit that exceeded expectations. Despite declining volumes, General Mills boosted its earnings through strategic price increases and cost-saving measures.
As the company behind well-known food brands like Cheerios, Häagen-Dazs, and Betty Crocker, General Mills remains optimistic about its full-year prospects. It confidently reiterated its outlook, citing factors such as the ongoing health of consumers, a gradual easing of inflationary pressures, and improved stability in the supply chain.
General Mills’ stock (GIS) soared by 3.5% in premarket trading, indicating a promising start to the day and potentially reaching its highest opening price since August 2023.
For the quarter ending February 25, the company reported a net income of $670.1 million, equivalent to $1.17 per share, compared to $553.1 million or 92 cents per share during the same period last year.
These results exceeded the earnings per share consensus estimate of $1.05 by FactSet, showcasing G Although General Mills experienced a slight decline in sales by 0.5% to $5.10 billion, the figures surpassed analysts’ expectations, coming in above the FactSet consensus of $4.97 billion.
This was primarily driven by a 2% increase in price and mix, which offset a 2% decline in volume.
Within its North American retail segment, sales remained relatively steady at $3.2 billion compared to the previous year. While net price realization rose, this was offset by a decrease in pound volume.
Sales for U.S. morning foods saw a modest increase in the low-single-digit percentage range, while sales for meals, baking, and snacks experienced a slight decline in the low-single-digit percentage range.
On the pet front, sales dipped by 3% to $624 million, attributed to declines in pet treats and dry pet food, although there was some growth in wet pet food.
Despite challenges, North America Foodservice sales increased by 1% to $552 million. This growth was achieved through price increases, although volume remained flat. Notably, this growth occurred despite a 4-percentage-point headwind from bakery-flour pricing.
General Mills also saw an improvement in its gross margin, which increased by 1 percentage point to 33.5%. This improvement was attributed to cost savings and favorable price realization, although it was partially offset by higher cost inflation and other supply chain costs.
Looking ahead to the full fiscal year, General Mills reiterated its guidance ranges, expecting adjusted EPS growth of 4% to 5%, excluding currency translation impacts, and organic sales growth between down 1% and flat.
Despite the challenges faced, General Mills’ stock has shown resilience, gaining 5.4% year-to-date, outperforming the Consumer Staples Select Sector ETF XLP (0.17%), and trailing slightly behind the broader S&P 500 index SPX, which gained 8.6%.
Looking ahead, General Mills’ reaffirmation of its guidance for adjusted EPS growth and organic sales growth underscores management’s confidence in the company’s long-term prospects. This commitment to transparency and consistency provides investors with a clear roadmap for future performance, instilling further confidence in the company’s resilience and strategic direction.