General Mills Cuts Fiscal 2025 Guidance Despite Q3 Earnings Beat

General Mills, Inc. GIS reported mixed third-quarter fiscal 2025 results, wherein the bottom line surpassed the Zacks Consensus Estimate while the top line missed the same. Both earnings and net sales declined year over year, reflecting weaker performance. Organic net sales were below the company's expectations, primarily due to more-than-anticipated retailer inventory headwinds and a slowdown in snacking categories during the quarter. As a result, management lowered its guidance for fiscal 2025.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.General Mills posted adjusted earnings of $1 per share, which beat the Zacks Consensus Estimate of 95 cents. The bottom line declined 15% year over year on a constant-currency (cc) basis, attributed to reduced adjusted operating profit, increased adjusted effective tax rate and higher net interest expense. However, the impact was partially offset by reduced net shares outstanding.Net sales dropped 5% to $4,842.2 million, impacted by reduced pound volume and unfavorable foreign currency exchange rates. Organic net sales also saw a 5% decline. According to Nielsen-measured data, retail sales inched down 1% in measured markets during the quarter. The four-point gap between organic net sales and retail sales growth was mainly due to reduced retailer inventory and the anticipated reversal of certain second-quarter timing benefits. The top line missed the Zacks Consensus Estimate of $4,955 million.Image Source: Zacks Investment ResearchGIS’ Quarterly Margin PerformanceThe adjusted gross margin declined 60 basis points (bps), reaching 33.4% of net sales, mainly due to input cost inflation, unfavorable net price realization and mix, and supply chain deleverage. However, Holistic Margin Management (“HMM”) cost savings provided a partial offset.General Mills’ operating profit dropped 2% to $891 million, impacted by reduced gross profit dollars and increased selling, general and administrative (SG&A) expenses. This decline was slightly mitigated by a divestiture gain. Despite the profit dip, the operating profit margin improved by 50 bps, reaching 18.4%.Decoding GIS’ Segmental PerformanceNorth America Retail: Revenues in the segment came in at $3,009.1 million, down 7% year over year. The decrease was due to reduced pound volume and unfavorable net price realization and mix. The Canada yogurt divestiture contributed to a 1% reduction in net sales. Organic net sales declined 6%. Segment operating profit fell 14% to $648 million, mainly owing to reduced volume, input cost inflation and unfavorable pricing and mix. However, HMM cost savings offered some respite.International: Revenues in the segment came in at $651.3 million, down 4% year over year. The results were impacted by a 5-point headwind from unfavorable foreign currency exchange, partially offset by a 4-point boost from the Edgard & Cooper acquisition. Organic net sales dropped 3%, thanks to declines in China and Brazil, though this was partially offset by growth in distributor markets, Europe and Australia. Segment operating profit dipped 1% to $18 million.North America Pet: Revenues came in at $623.7 million, flat year over year. Results included a 5-point boost from the North American Whitebridge Pet Brands acquisition, while organic net sales declined 5%. Organic net sales underperformed all-channel retail sales, thanks to a decline in retailer inventory levels. Segment operating profit fell 20% to $102 million, impacted by a double-digit increase in media investment and elevated input costs.North America Foodservice: Revenues came in at $555.3 million, which inched up 1% with organic net sales also up 1%. Growth was driven by strong performance in cereal and bread, though bakery flour sales declined. Despite a slowdown in away-from-home industry sales, the segment continued to gain market share in K-12 schools, healthcare and college & university channels. Segment operating profit grew 1% to $82 million, supported by favorable net price realization, mix improvements and HMM cost savings, though higher input and supply chain costs posed challenges.GIS’ Financial Health Snapshot & Other DevelopmentsGeneral Mills ended the quarter with cash and cash equivalents of $521.3 million, long-term debt of $11,839.6 million and total stockholders’ equity (excluding noncontrolling interests) of $9,263.2 million.GIS generated $2,306.6 million in cash from operating activities in the nine months ended Feb. 23, 2025. Capital investments amounted to $405 million during the same period. The company paid out dividends worth $1 billion and bought nearly 14 million shares for $902 million in the first nine months.Constant-currency sales from the joint venture of Cereal Partners Worldwide inched down 1% in the third quarter. For Haagen-Dazs Japan, sales jumped 10% year over year at cc.General Mills, Inc. Price, Consensus and EPS Surprise General Mills, Inc. price-consensus-eps-surprise-chart | General Mills, Inc. QuoteWhat to Expect From GIS in Fiscal 2025General Mills’ fiscal third-quarter revenues fell below expectations, impacted by retailer inventory-related headwinds across North America Retail and North America Pet, a slowdown in U.S. snacking categories and weaker demand in U.S. away-from-home food channels. The company expects macroeconomic uncertainty to continue affecting consumer behavior in the fiscal fourth quarter. Also, General Mills plans to invest in consumer value, media support and in-store visibility while also increasing investments ahead of significant fiscal 2026 product launches.As a result, the company has updated its full-year fiscal 2025 outlook. Organic net sales are now projected to decline between 2% and 1.5%, compared to the earlier expectation of the lower end of a range between flat and 1% growth. Adjusted operating profit and adjusted earnings per share (EPS) are now expected to decline between 8% and 7% in constant currency, a revision from the prior forecast of a 2-4% decline, indicating lower net sales. The company still envisions a free cash flow conversion of at least 95% of adjusted after-tax earnings.This Zacks Rank #4 (Sell) company’s shares have dropped 6.9% in the past three months compared with the industry’s decline of 1.6%.Some Solid BetsBRF S.A. BRFS raises, produces and slaughters poultry and pork for the processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products. It presently has a Zacks Rank #2 (Buy). BRFS delivered a trailing four-quarter average earnings surprise of 9.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for BRFS’ current financial-year sales and earnings indicates growth of 0.3% and 22.2%, respectively, from the year-ago reported figures.Post Holdings, Inc. POST operates as a consumer-packaged goods holding company in the United States and internationally. It currently carries a Zacks Rank #2.The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and earnings indicates growth of 0.3% and 2.2%, respectively, from the prior-year reported levels. POST delivered a trailing four-quarter earnings surprise of 22.3%, on average.United Natural Foods, Inc. UNFI distributes natural, organic, specialty, produce and conventional grocery and non-food products in the United States and Canada. It currently carries a Zacks Rank of 2. UNFI delivered a trailing four-quarter earnings surprise of 408.7%, on average.The consensus estimate for United Natural Foods’ current financial-year sales and earnings implies growth of 1.9% and 485.7%, respectively, from the year-ago figures.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report General Mills, Inc. (GIS): Free Stock Analysis Report BRF S.A. (BRFS): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report Post Holdings, Inc. (POST): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks