uploads///General Mills Beats Fiscal Q EPS Estimates

What Caused General Mills’ Fiscal 3Q16 Earnings to Fall by 7%?


Mar. 29 2016, Updated 12:33 p.m. ET

Earnings beat estimates

On March 23, 2016, General Mills (GIS) reported its results for fiscal 3Q16, which ended on February 28, 2016. Earnings and sales declined YoY (year-over-year). We will discuss the results in detail in the next parts of this series.

Adjusted EPS (earnings per share) fell by 7% to $0.65 compared to $0.70 in fiscal 3Q15. However, it surpassed estimates by ~5%.On a constant currency basis, the adjusted EPS declined by 6%. Let’s see what caused the decline of 7% in earnings in fiscal 3Q16.

As anticipated by the company, the Green Giant divestiture and currency translation effects took a toll on its earnings in fiscal 3Q16. The adjusted EPS excludes restructuring and project-related expenses and mark-to-market valuation effects.

Cost savings from margin management and the company’s incremental cost reduction projects are anticipated to drive earnings growth for fiscal 2016.

Low single-digit growth in adjusted diluted earnings per share in constant currency is expected for fiscal 4Q16. The currency translation effect is expected to cause a $0.08 headwind to full-year adjusted diluted EPS growth in 2016.

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Peers’ earnings

General Mills’ peers in the packaged food industry include Campbell Soup (CPB), ConAgra Foods (CAG), and Kellogg (K). Campbell Soup, ConAgra, and Kellogg recorded EPS of $0.87, $0.71, and $0.79 for their last quarter, respectively.

To gain exposure to General Mills, you can invest in ETFs such as the Vanguard Consumer Staples ETF (VDC). VDC invests 1.9% of its portfolio in General Mills as of March 28. It also invests 1.02% in ConAgra, 1.03% in Kellogg, and 0.59% in Campbell Soup.

What to look for in this series

In this series, we will look closely at General Mills’ fiscal 3Q16 performance. We will discuss what caused the decline in sales for the quarter, along with the segment’s performance. We will also look into the company’s efforts to maintain strong margins and drive retail sales performance.

We will also look at the company’s outlook for the remainder of 2016, along with an update on the Venezuela divestiture. We will finish up the series with Wall Street recommendations for the stock, the increase in its quarterly dividend, the company’s valuation multiple, the stock performance after the results, and the moving averages.


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