GIS Q1 Earnings Beat Estimates, Organic Sales Down 3% Y/Y

General Mills, Inc. GIS reported first-quarter fiscal 2026 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Both earnings and net sales declined year over year. General Mills posted adjusted earnings of 86 cents per share, which beat the Zacks Consensus Estimate of 81 cents. The bottom line declined 20% year over year on a constant-currency (cc) basis, attributed to reduced adjusted operating profit and increased adjusted effective tax rate. However, the impact was partially offset by reduced net shares outstanding.Net sales dropped 7% to $4,517.5 million, including a four-point headwind from impacts of divestitures and acquisitions. However, the top line surpassed the Zacks Consensus Estimate of $4,499 million. Organic net sales also saw a 3% decline, mainly due to negative organic net price realization and mix reflecting price investments as well as unfavorable trade expenses timing in North America Retail.GIS’ Quarterly Margin PerformanceThe adjusted gross margin declined 120 basis points (bps), reaching 34.2% of net sales, mainly due to input cost inflation, partly offset by the favorable net price realization and mix impacts, including the product mix benefit from the yogurt divestitures. We expected a gross margin contraction of 90 bps.General Mills’ adjusted operating profit dropped 18% in constant currency, impacted by reduced adjusted gross profit dollars. The adjusted operating profit margin was down 210 bps, reaching 15.7%. We expected an adjusted operating margin of 15% for the quarter.General Mills, Inc. Price, Consensus and EPS Surprise General Mills, Inc. price-consensus-eps-surprise-chart | General Mills, Inc. QuoteDecoding GIS’ Segmental PerformanceNorth America Retail: Revenues in the segment were $2,625.5 million, down 13% year over year. The decrease was due to reduced pound volumes, with an eight-point headwind from the North American Yogurt divestitures. Organic net sales dipped 5%. Nielsen-measured retail sales also dropped 4%, with the one-point gap to organic net sales growth backed by an earlier-anticipated headwind from trade expense timing. Higher consumer value, innovation and product news aided improved pound competitiveness, with the segment holding or benefiting pound share in eight of its top 10 U.S. categories. Segment operating profit of $564 million fell 24% for both reported and in constant currency, mainly owing to lower volumes and the impacts of the yogurt divestitures.International: Revenues in the segment were $760.2 million, up 6% year over year, including a three-point gain from foreign currency. Organic net sales increased 4%, backed by growth in India, North Asia and Europe. Segment operating profit increased to $66 million from $21 million a year ago.North America Pet: Revenues rose 6% year over year to $610 million, including an 11-point contribution from the acquisition of North American Whitebridge Pet Brands. Organic net sales dipped 5%, lagging the all-channel retail sales by roughly four points, mainly due to shipment timing differences. Segment operating profit dropped 5% to $113 million, impacted by increased input costs and elevated selling, general and administrative (SG&A) expenses with investments ahead of the upcoming fresh pet food launch, somewhat offset by favorable net price realization and mix.North America Foodservice: Revenues were $516.7 million, which decreased 4%. Organic net sales were up 1%, backed by growth in cereal and biscuits. Market index pricing on bakery flour hurt organic sales by two points. Segment operating profit of $71 million almost met the year-ago level, with the headwind from the yogurt divestitures mainly offset by growth in the remaining business.GIS’ Financial Health Snapshot & Other DevelopmentsGeneral Mills ended the quarter with cash and cash equivalents of $952.9 million, long-term debt of $12,218.4 million and total stockholders’ equity (excluding noncontrolling interests) of $9,506.6 million.GIS generated $397 million in cash from operating activities in first-quarter fiscal 2026. Capital investments amounted to $110 million during the same period. The company paid out dividends worth $331 million and bought shares for $500 million in the aforementioned period.What to Expect From GIS in Fiscal 2026?General Mills’ top priority for fiscal 2026 is to revive volume-driven organic sales growth amid a challenging consumer environment. The company anticipates category growth to come below its long-term expectations, with less benefit from price/mix.The company plans increased investment in value, innovation, product news and brand building, including the launch of Blue Buffalo in the U.S. fresh pet food segment in the fiscal second quarter. Still, these growth efforts, along with input cost inflation and tariffs, are expected to exceed savings initiatives. Additionally, yogurt divestitures and the Whitebridge Pet acquisition are projected to reduce adjusted operating profit growth by about five points in fiscal 2026.The company has reaffirmed its fiscal 2026 outlook. Organic net sales are projected to range from a 1% decline to a 1% increase, while adjusted operating profit and adjusted earnings per share (EPS) are expected to decline 10-15% in constant currency. Free cash flow conversion is anticipated to be at least 95% of adjusted after-tax earnings. The net impacts of divestitures, acquisitions, foreign currency and the 53rd week are likely to reduce net sales by about 4%. Foreign currency exchange is not likely to have a material effect on adjusted operating profit or adjusted EPS growth.This Zacks Rank #4 (Sell) company’s shares have lost 7.7% in the past three months compared with the industry’s dip of 2%.Stocks to Consider in the Consumer Staples SpacePost Holdings POST, which is a consumer-packaged goods holding company, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. POST delivered a trailing four-quarter earnings surprise of 21.4%, on average. The Zacks Consensus Estimate for Post Holdings’ current financial-year earnings indicates growth of 10.9% from the year-ago number. The Chefs' Warehouse, Inc. CHEF distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. It currently sports a Zacks Rank of 1.The Zacks Consensus Estimate for The Chefs' Warehouse’s current financial-year sales and earnings indicates growth of 6.6% and 19.1%, respectively, from the prior-year levels. CHEF delivered a trailing four-quarter earnings surprise of 11.3%, on average.Ingredion Incorporated INGR, which is a provider of ingredient solutions specialized in nature-based sweeteners, starches and nutrition ingredients, currently carries a Zacks Rank #2 (Buy).The Zacks Consensus Estimate for INGR’s current financial-year earnings is expected to rise 6.7% from the corresponding year-ago reported figure. INGR delivered a trailing four-quarter earnings surprise of 11.1%, on average.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.See Top Quantum Stocks Now >>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 Ingredion Incorporated (INGR): Free Stock Analysis Report The Chefs' Warehouse, Inc. (CHEF): 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