General Mills’ 2Q18 Earnings Meets Analysts’ Estimates



Earnings versus estimate

General Mills (GIS) announced its fiscal 2Q18 (period ended November 26) earnings on December 20, 2017. General Mills’ adjusted EPS (earnings per share) of $0.82 came in line with analysts’ estimate but fell 3.5% YoY (year-over-year). Notably, the company’s sales returned to growth during the reported quarter.

What affected General Mills’ earnings

General Mills’ fiscal 2Q18 earnings were supported by a lower adjusted effective tax rate (29.3% versus 32.4%) and a decline in average outstanding shares. However, these benefits were more than offset by increased input costs due to currency-related inflation on imported products and unfavorable trade expenses. Moreover, increased advertising and media expenses remained a drag.

Most of the company’s peers saw their earnings affected by higher costs during their last reported quarters. For instance, Campbell Soup’s (CPB) EPS fell 8% in fiscal 1Q18, reflecting weak sales and higher input costs. Meanwhile, J.M. Smucker’s (SJM) earnings fell 1.5% in fiscal 2Q18 as benefits from improved sales and lower outstanding shares were more than offset by inflation in green coffee prices. Despite margin pressure from increased input costs, analysts expect Conagra Brands’ (CAG) EPS to improve YoY in fiscal 2Q18 thanks to increased cost savings.


General Mills reiterated its earlier guidance and expects its adjusted earnings to increase by 1.0%–2.0% on a constant-currency basis in fiscal 2018. The company is upbeat about its 2H18 results and anticipates margin headwinds to subside and cost savings to accelerate in fiscal 4Q18, which should support bottom-line growth.

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