General Mills (GIS)

Packaged foods company General Mills (NYSE:GIS) met Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 6.8% year on year to $4.52 billion. Its non-GAAP profit of $0.86 per share was 5.4% above analysts’ consensus estimates.

Company Overview

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.

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.

Competitors in packaged food with broad brand portfolios include Kellogg (NYSE:K), Mondelez (NASDAQ:MDLZ), Kraft Heinz (NASDAQ:KHC), and Nestle (SWX:NESN).

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $19.16 billion in revenue over the past 12 months, General Mills is larger than most consumer staples companies and benefits from economies of scale, enabling it to gain more leverage on its fixed costs than smaller competitors. Its size also gives it negotiating leverage with distributors, allowing its products to reach more shelves. However, its scale is a double-edged sword because there are only so many big store chains to sell into, making it harder to find incremental growth. To expand meaningfully, General Mills likely needs to tweak its prices, innovate with new products, or enter new markets.

As you can see below, General Mills struggled to increase demand as its $19.16 billion of sales for the trailing 12 months was close to its revenue three years ago. This is mainly because consumers bought less of its products - we’ll explore what this means in the "Volume Growth" section.

This quarter, General Mills reported a rather uninspiring 6.8% year-on-year revenue decline to $4.52 billion of revenue, in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to decline by 2.8% over the next 12 months, a slight deceleration versus the last three years. This projection doesn't excite us and implies its products will see some demand headwinds.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether General Mills generated its growth (or lack thereof) from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, General Mills’s average quarterly volumes have shrunk by 2.4%. This isn’t ideal for a consumer staples company, where demand is typically stable. In the context of its 2.5% average organic sales declines, we can see that most of the company’s losses have come from fewer customers purchasing its products.

In General Mills’s Q3 2026, sales volumes dropped 8% year on year. This result represents a further deceleration from its historical levels, showing the business is struggling to move its products.

All else equal, we prefer higher gross margins because they usually indicate that a company sells more differentiated products, has a stronger brand, and commands pricing power.

General Mills’s unit economics are higher than the typical consumer staples company, giving it the flexibility to invest in areas such as marketing and talent to reach more consumers. As you can see below, it averaged a decent 34.5% gross margin over the last two years. That means for every $100 in revenue, $65.48 went towards paying for raw materials, production of goods, transportation, and distribution.

This quarter, General Mills’s gross profit margin was 33.9%, in line with the same quarter last year and exceeding analysts’ estimates by 2%. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is a key profitability metric because it accounts for all expenses enabling a business to operate smoothly, including marketing and advertising, IT systems, wages, and other administrative costs.

General Mills has been an efficient company over the last two years. It was one of the more profitable businesses in the consumer staples sector, boasting an average operating margin of 19.3%.

Analyzing the trend in its profitability, General Mills’s operating margin rose by 5.1 percentage points over the last year, showing its efficiency has meaningfully improved.

This quarter, General Mills generated an operating margin profit margin of 38.2%, up 21.1 percentage points year on year due to a non-recurring divestiture gain of $1.1 billion (pre-tax). 

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

In Q3, General Mills reported adjusted EPS of $0.86, down from $1.07 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 5.4%. Over the next 12 months, Wall Street expects General Mills’s full-year EPS of $4 to shrink by 7.3%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

General Mills has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 12.5% over the last two years, quite impressive for a consumer staples business.

Taking a step back, we can see that General Mills’s margin dropped by 3.1 percentage points over the last year. This decrease warrants extra caution because General Mills failed to grow its revenue organically. Its cash profitability could decay further if it tries to reignite growth through investments.

General Mills’s free cash flow clocked in at $287.5 million in Q3, equivalent to a 6.4% margin. The company’s cash profitability regressed as it was 3.6 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although General Mills hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked. Its five-year average ROIC was 14.4%, higher than most consumer staples businesses.

General Mills reported $952.9 million of cash and $14.41 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $4.75 billion of EBITDA over the last 12 months, we view General Mills’s 2.8× net-debt-to-EBITDA ratio as safe. We also see its $267.8 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We liked that General Mills beat analysts’ EPS expectations this quarter on in-line revenue due to better-than-expected gross margin. The company also reaffirmed previously-given full-year guidance. Overall, this print had few surprises. The stock remained flat at $49.14 immediately following the results.

Updated: December 3, 2025 at 10:02 PM EST

Before deciding whether to buy General Mills or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

General Mills’s business quality ultimately falls short of our standards. To kick things off, its revenue has declined over the last three years, and analysts expect its demand to deteriorate over the next 12 months. And while its expanding operating margin shows the business has become more efficient, the downside is its projected EPS for the next year is lacking. On top of that, its shrinking sales volumes suggest it’ll need to change its strategy to succeed.

General Mills’s P/E ratio based on the next 12 months is 12.5x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $53.37 on the company (compared to the current share price of $46.25).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.