General Mills (NYSE:GIS) Reports Sales Below Analyst Estimates In Q2 Earnings

Kayode Omotosho /
2024/06/26 7:09 am EDT

Packaged foods company General Mills (NYSE:GIS) missed analysts' expectations in Q2 CY2024, with revenue down 6.3% year on year to $4.71 billion. It made a non-GAAP profit of $1.01 per share, down from its profit of $1.12 per share in the same quarter last year.

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General Mills (GIS) Q2 CY2024 Highlights:

  • Revenue: $4.71 billion vs analyst estimates of $4.86 billion (3% miss)
  • EPS (non-GAAP): $1.01 vs analyst estimates of $0.99 (1.5% beat)
  • Full year EPS (non-GAAP) guidance calls for flat growth vs. previous year (below expectations)
  • Gross Margin (GAAP): 35.8%, up from 34.5% in the same quarter last year
  • Free Cash Flow of $575.2 million, down 23.4% from the previous quarter
  • Organic Revenue fell 6% year on year (5% in the same quarter last year)
  • Sales Volumes were down 2% year on year
  • Market Capitalization: $37.97 billion

“We delivered on our updated guidance in fiscal 2024 by pivoting our plans and enhancing our efficiency in response to a more challenging operating environment,” said General Mills Chairman and Chief Executive Officer Jeff Harmening.

Best known for its portfolio of powerhouse breakfast cereal brands, General Mills (NYSE:GIS) is a packaged foods company that has also made a mark in cereals, baking products, and snacks.

Shelf-Stable Food

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Sales Growth

General Mills is one of the largest consumer staples companies and benefits from a strong brand, giving it customer trust and leverage in many purchasing and distribution negotiations.

As you can see below, the company's annualized revenue growth rate of 3.1% over the last three years was sluggish as consumers bought less of its products. We'll explore what this means in the "Volume Growth" section.

General Mills Total Revenue

This quarter, General Mills missed Wall Street's estimates and reported a rather uninspiring 6.3% year-on-year revenue decline, generating $4.71 billion in revenue. Looking ahead, Wall Street expects sales to grow 2% over the next 12 months, an acceleration from this quarter.

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Organic Revenue Growth

When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business's performance excluding the impacts of foreign currency fluctuations and one-time events such as mergers, acquisitions, and divestitures.

The demand for General Mills's products has been stable over the last eight quarters but fallen behind the broader sector. On average, the company has posted feeble year-on-year organic revenue growth of 1.8%.

General Mills Year-On-Year Organic Revenue Growth

In the latest quarter, General Mills's organic sales fell 6% year on year. This decline was a reversal from the 5% year-on-year increase it posted 12 months ago. We'll be keeping a close eye on the company to see if this turns into a longer-term trend.

Key Takeaways from General Mills's Q2 Results

Organic revenue unfortunately missed analysts' expectations and its total report revenue also missed Wall Street's estimates. Additionally, full year EPS guidance was below expectations. Overall, this quarter could have been better. The stock traded down 3.5% to $64.92 immediately after reporting.

General Mills may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.