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Why Did General Mills’ Earnings Fall in Fiscal 4Q16?

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Earnings fell but beat estimates

General Mills’ (GIS) fiscal 4Q16 earnings beat estimates by 10%. Adjusted EPS (earnings per share) came in around $0.66, a decline of 12% compared to $0.75 in fiscal 4Q15.

The fourth quarter results were affected by headwinds from currency translation, one less week compared to fiscal 2015, and the sale of its North American Green Giant business.

Fiscal 2016 net earnings totaled $1.7 billion, and adjusted diluted EPS was about $2.92 in fiscal 2016. This is an increase of 2% compared to $2.86 in fiscal 2015. Adjusted diluted EPS increased 5% on a constant-currency basis.

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Earnings expectations for fiscal 2017

General Mills said it expects its first quarter adjusted diluted EPS to be below the comparable period’s EPS. However, for the remaining three quarters of 2017, the company expects positive earnings growth.

GIS expects adjusted diluted EPS to be 6%–8% in constant currency for fiscal 2017. It estimates a $0.01–$0.02 impact from currency headwinds.

Peer earnings

General Mills’ peers in the packaged food industry include Pinnacle Foods (PF), Mead Johnson Nutrition (MJN), and J&J Snack Foods (JJSF). In their last reported quarters, Pinnacle’s earnings increased 3%, and J&J Snack’s earnings grew 6%. MJN’s earnings fell 20%.

To gain exposure to General Mills, you can invest in ETFs such as the Victory CEMP US EQ Incom Enhanced Volatility Wtd Index ETF (CDC) and the PowerShares High Yield Equity Dividend Achievers ETF (PEY), which invest 1.5% and 1.6%, respectively, in General Mills.

In the next part, we’ll see what drove down General Mills’ revenue growth for fiscal 4Q16.

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