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General Mills Stock Fell, Q4 Sales Lagged Expectations

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Mixed fourth-quarter results

On June 26, General Mills (GIS) stock fell 5.8% as of 9:31 AM ET. The company’s fourth-quarter sales lagged analysts’ expectations. The adjusted EPS beat analysts’ forecast. The fourth quarter ended on May 26.

General Mills’ sales grew 7.0% to $4.16 billion in the fourth quarter. However, the sales fell short of analysts’ forecast of $4.24 billion. The company’s top-line growth mainly reflected the impact of the Blue Buffalo Pet Products acquisition, which was completed in April 2018. General Mills’ fourth-quarter revenues were impacted negatively by currency headwinds. Excluding the headwinds, the growth rate would have been 9.0%.

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General Mills’ organic sales growth excludes the impact of acquisitions and divestitures and currency fluctuations. The organic sales growth fell 1.0% in the fourth quarter due to lower volumes. General Mills’ North America Retail segment and Europe and Australia segment’s organic sales fell 2% and 3%, respectively. The company’s Convenience Stores & Foodservice segment and Asia and Latin America segment’s organic sales grew 2% and 1%, respectively, in the fourth quarter.

General Mills’ North America Retail business was hit by lower snack sales and weakness in the Canada business. A shift toward healthier choices is impacting General Mills and other packaged food companies.

General Mills’ adjusted EPS increased 5.1% on a YoY (year-over-year) basis to $0.83 in the fourth quarter. The EPS beat analysts’ estimate of $0.77. The adjusted EPS growth was driven by higher sales and a lower effective tax rate. The growth was partially offset by the higher interest expense and increased average diluted shares count.

Fiscal 2020 outlook

General Mills expects its fiscal 2020 organic sales growth to be 1%–2%. In fiscal 2019, General Mills’ reported sales grew 7.2% to $16.9 billion due to the Blue Buffalo acquisition. The company’s organic sales were flat on a YoY basis in fiscal 2019.

General Mills aims to improve its organic sales through various initiatives including driving growth in snack bars, Häagen-Dazs ice cream, Old El Paso Mexican food, and the company’s portfolio of natural and organic brands.

General Mills expects its fiscal 2020 adjusted EPS growth to be 3%–5% excluding the impact of currency fluctuations compared to $3.22 in fiscal 2019.

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