General Mills, Inc. (NYSE: $GIS) is a Minneapolis-based food giant that produces and sells consumer food products like pizzas, soups, cereals, and pet food.
On March 20, 2024, it reported its fiscal 2024 third-quarter and nine-month results, demonstrating resilience amid a challenging operating environment. Despite facing inflationary pressures, supply chain disruptions, and shifting consumer preferences, the company managed to maintain a steady course, underscoring its strategic prowess and operational agility.
Q32024 Financial Performance Highlights and FY2024 Outlook
In the third quarter, General Mills’ net sales decreased by 1% year-over-year to $5.1 billion, reflecting lower pound volume partially offset by favorable net price realization and mix. Organic net sales, excluding FX impact, acquisitions, and divestitures, also declined by 1%. However, on a two-year compound growth basis, net sales increased by 6%, and organic net sales grew by 7%, showcasing the company’s ability to navigate the volatile economic landscape.
For the nine-month period ended February 25, 2024, net sales increased by 1% to $15.1 billion on favorable net price realization and mix, offset by lower pound volume. Organic net sales rose by 1%, while the two-year compound growth rate for organic net sales stood at 6%.
General Mills 2024 Outlook
For the fiscal year 2024, the company anticipates its organic net sales growth to be in the range of a 1% decline to remain flat compared to the previous year. However, the company expects an increase of 4% to 5% in its adjusted operating profit and adjusted diluted EPS on an FX-neutral basis. Additionally, free cash flow conversion is projected to be at least 95% of the adjusted after-tax earnings for the same period.
Profitability and Margins
General Mills’ operating profit surged 25% in the third quarter to $911 million, fueled primarily by lower compensation and benefits expenses, higher gross profit dollars, and product recall recoveries. The operating profit margin expanded by 370 basis points to 17.9%.
Adjusted operating profit, which excludes certain items affecting comparability, increased by 14%, while the adjusted operating margin improved by 220 basis points to 17.9%.
For the nine-month period, operating profit increased modestly by 1% to $2.65 billion, while the adjusted operating profit grew by 9% on a constant-currency basis. The adjusted operating profit margin expanded by 150 basis points to 18.5%.
Earnings and Shareholder Returns
Net earnings attributable to General Mills rose by 21% in the third quarter to $670.1 million, driven by higher operating profit and lower net shares outstanding, partially offset by higher net interest expense and a higher effective tax rate. Diluted earnings per share (EPS) increased by 27% to $1.17.
Adjusted diluted EPS grew by 22% on a constant-currency basis to $1.17, supported by higher adjusted operating profit, lower net shares outstanding, and a lower adjusted effective tax rate.
For the nine-month period, net earnings attributable to General Mills declined by 2% to $1.9 billion, while diluted EPS grew by 2% to $3.33. Adjusted diluted EPS rose by 11% on a constant-currency basis to $3.51.
The company remained committed to returning value to shareholders, repurchasing approximately 23.5 million shares for $1.6 billion over the nine-month period, while dividends paid increased by 6% to $1.0 billion.
General Mills Segment Performance
North America Retail
The North America Retail segment, which includes iconic brands like Cheerios and Nature Valley, reported flat net sales of $3.2 billion in the third quarter. Organic net sales were also flat, although they grew by 9% on a two-year compound basis. Segment operating profit declined by 4% due to higher supply chain costs, input cost inflation, lower volume, and supply chain deleverage, partially offset by cost savings and favorable pricing.
Pet
The Pet segment, home to the Blue Buffalo brand, experienced a 3% decline in net sales but a 25% increase in operating profit in the third quarter. Organic net sales were down 3% but grew by 5% on a two-year compound basis. The strong operating profit growth was driven by cost savings, favorable pricing and mix, offsetting lower volume, higher selling, general and administrative (SG&A) expenses, and input cost inflation.
North America Foodservice
The North America Foodservice segment saw a 1% increase in net sales to $552 million, while organic net sales also rose 1% in the third quarter, despite a 4-point headwind from market index pricing on bakery flour. Segment operating profit dipped by 1% due to higher supply chain costs and SG&A expenses, partially mitigated by favorable pricing and cost savings.
International
The International segment faced challenges, with net sales falling 3% to $680 million, driven by lower pound volume and organic net sales declining by 3% in the third quarter. Segment operating profit plunged by 57% to $18.2 million, primarily due to higher input costs and lower volume.
General Mills’ stock performance
General Mills (GIS) is trading up 1.37% at $69.57 as of writing. The consumer foods company announced a quarterly cash dividend of $0.59 per share, with an ex-dividend date of April 9, 2024. This dividend payment demonstrates General Mills’ commitment to returning value to shareholders through consistent payouts.
Today’s positive performance reflects investor confidence in the company’s ability to navigate inflationary pressures and maintain profitability in the face of evolving consumer preferences. As a defensive consumer staples stock, General Mills may continue to attract investor interest during this period of market volatility.
Should You Buy General Mills (GIS) Stock in 2024?
Despite facing challenges, General Mills demonstrated resilience by delivering solid Q3 results and maintaining profitability. The company’s strategic prowess, operational agility, and commitment to shareholder returns through consistent dividends and share buybacks are encouraging signs.
However, the outlook for FY2024 suggests modest growth, and the stock’s performance will depend on General Mills’ ability to navigate ongoing inflationary pressures and shifting consumer behavior.
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