General Mills (NYSE:GIS) reports second-quarter sales were below analyst estimates

General Mills (NYSE:GIS), the packaged food company, missed analyst expectations in the second quarter of 2024, reporting a 6.3% year-over-year revenue decline to $4.71 billion. It posted non-GAAP earnings of $1.01 per share, compared with earnings of $1.12 per share in the same quarter last year.

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General Mills (GIS) Q2 2024 Highlights:

• Income: $4.71 billion vs. analyst estimates of $4.86 billion (missing 3%)

• EPS (non-GAAP): $1.01 vs. analyst estimates of $0.99 (over 1.5%)

• Full-Year EPS Guidance (Non-GAAP). predicts flat growth compared to the previous year (below expectations)

• Gross margin (GAAP): 35.8%, compared to 34.5% in the same quarter last year

• Free cash flow amounted to USD 575.2 million, a decrease of 23.4% compared to the previous quarter

• Organic revenue decreased by 6% year-on-year (5% in the same quarter last year)

• Sales volume decreased by 2% year on year

• Market capitalization: $37.97 billion

“During fiscal year 2024, we implemented our updated guidance by changing our plans and increasing our efficiency in response to a more challenging operating environment,” said General Mills President and CEO Jeff Harmening.

Best known for its portfolio of powerful cereal brands, General Mills (NYSE:GIS) is a packaged foods company that has also made a name for itself in the cereal, baking and snacks industries.

Food with shelf life

As America industrialized and moved away from an agricultural economy, people faced greater demands on their time. Packaged foods have emerged as a convenience solution for the growing American family, whether it’s canned foods or snacks. Today, Americans are looking for brands characterized by high quality, reliability and reasonable prices. Additionally, there is an increasing emphasis on health-conscious and sustainable food. Packaged food supplies are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they adapt to changing consumer preferences. The industry ranges from multinational corporations to smaller specialized companies and is subject to food safety and labeling regulations.

Increase in sales

General Mills is one of the largest consumer staples companies, benefiting from a strong brand that gives it customer trust and an advantage in many purchasing and distribution negotiations.

As you can see below, the company’s 3.1% annual revenue growth rate over the past three years was slow as consumers bought fewer of its products. We’ll check what this means in the “Volume Growth” section.

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

The story continues

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Organic revenue growth

When analyzing revenue growth, what we care most about is organic revenue increase. This ratio reflects a company’s performance excluding the impact of currency fluctuations and one-time events such as mergers, acquisitions and divestitures.

Demand for General Mills products has remained steady over the past eight quarters but has lagged the broader sector. On average, the company recorded weak year-over-year organic revenue growth of 1.8%.

In the most recent quarter, General Mills’ organic sales fell 6% year-over-year. This decline was a reversal of the 5% year-on-year growth recorded 12 months ago. We’ll be watching the company closely to see if this develops into a long-term trend.

Key Takeaways from General Mills’ Second Quarter Results

Unfortunately, organic revenue fell short of analyst expectations, and total reported revenue also missed Wall Street estimates. Additionally, full-year earnings per share guidance was below expectations. Overall, this quarter could have been better. Shares fell 3.5% to $64.92 immediately after the report.

General Mills may have had a difficult quarter, but does that actually create an investing opportunity right now? When making this decision, you need to take into account its valuation, business features, as well as what happened in the last quarter. We cover this in our full, practical research report, which you can read here – it’s free.