Analysts expect General Mills (GIS) to post a gross margin of 36.4% in fiscal 3Q17, up from 34.8% in fiscal 3Q16. The company’s EBITDA1 margin is expected to touch 20.1%, up from 19.6% in fiscal 3Q16. Analysts expect General Mills to post a net margin of 10.9%, up from 9.9% in fiscal 3Q16.
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General Mills’s (GIS) expansion is expected to be driven by holistic margin management (or HMM) and other cost-saving measures. These initiatives include zero-based budgeting, globalizing of sourcing, and improvement in buyer expertise and supplier leverage. These measures are expected to lower the cost of sales from 66.1% of total sales to 64.5% of total sales.
However, analysts expect the company’s SG&A (sales, general, and administrative) expenses to rise from 18.9% to 19.4%, which is expected to offset some of the expansion in its EBITDA margins.
Compared to fiscal 3Q16, the company’s D&A (depreciation and amortization) expenses and interest expenses are also expected to rise as a percentage of total revenues in fiscal 3Q17. The increase in these expenses is expected to offset some of the growth in net margins.
During the same period, Kellogg (K), B&G Foods (BGS), and Pinnacle Foods (PF) posted net margins of 10.5%, 4.7%, and 10.9%, respectively. In the corresponding quarter of the previous year, these companies posted net margins of 8.9%, 7.3%, and 11.4%, respectively.
For the next four quarters, analysts expect General Mills (GIS) to post gross margins, EBITDA margins, and net margins of 37.9%, 22.2%, and 12.5%, respectively. In the corresponding quarters of the previous year, GIS posted gross margins, EBITDA margins, and net margins of 35.6%, 21.2%, and 11.2%, respectively.
Next, we’ll look at General Mills’s fiscal 3Q17 estimates.