Things to Know Before General Mills' (GIS) Q1 Earnings Release
General Mills, Inc. GIS is likely to register top-line growth when it reports first-quarter fiscal 2024 earnings on Sep 20. The Zacks Consensus Estimate for revenues is pegged at $4.9 billion, suggesting a rise of 3.5% from the prior-year quarter’s reported figure.
The consensus mark for quarterly earnings has dropped by a penny in the past seven days to $1.08 per share, suggesting a decline of 2.7% from the year-ago quarter’s reported figure. General Mills has a trailing four-quarter negative earnings surprise of about 7%, on average.
Key Hurdles
General Mills has been battling cost inflation. In the fourth quarter of fiscal 2023, the company’s adjusted gross margin was partly hurt by elevated input costs, with input cost inflation being 9% in the quarter. On its fourth-quarter earnings call, management stated that the biggest factors impacting its show in fiscal 2024 are likely to be consumers’ economic status, cost inflation and the rising stability of supply-chain status.
For fiscal 2024, management expects input cost inflation of 5% of the total cost of goods sold, stemming from labor inflation. Labor inflation continues to impact the costs of sourcing, manufacturing and logistics. We expect the adjusted cost of goods sold to escalate by 3.7% in the first quarter of fiscal 2024.
The company also witnessed a rise in adjusted SG&A expenses in the fourth quarter, which included a double-digit spike in media investments. Management stated that as it steps into a potentially more difficult scenario, it is important for the company to elevate brand-related investments. We believe these might have impacted margins in the quarter under review. Our model suggests an adjusted SG&A expense increase of 9.1% year over year in the first quarter.
We note that sales in GIS’ International segment have been declining year over year for the past few quarters due to divestitures and currency headwinds. In the fourth quarter of fiscal 2023, revenues in the segment came in at $744.7 million, down 1% year over year. The downside can be attributed to the adverse impacts of divestitures and unfavorable currency rates. The net impact of divestitures and foreign currency movements is likely to lower fiscal 2024 overall company net sales growth by about half a percent, which also remains a concern for the quarter under review.
General Mills, Inc. Price, Consensus and EPS Surprise
General Mills, Inc. price-consensus-eps-surprise-chart | General Mills, Inc. Quote
Strength in the Accelerate Strategy
A focus on its Accelerate strategy has been aiding General Mills in making choices of how to win and where to play to boost profitability. Under how to win, General Mills is focused on four pillars, including brand building, undertaking innovations, unleashing scale and maintaining business strength. The where to play principle is outlined to enhance the company’s capabilities to generate profitability through geographic as well as product prioritization, along with portfolio restructuring.
For fiscal 2024, General Mills remains committed to the Accelerate strategy, underscored by its three priorities — competing efficiently through brand building and innovation, enhancing the supply chain by boosting Holistic Margin Management cost savings and curtailing costs and undertaking efficient capital allocation, rewarding shareholders and staying committed to reshaping the portfolio.
Management expects HMM cost savings of 4% of the cost of goods sold in fiscal 2024. Also, gains from net price realization through the company’s Strategic Revenue Management initiative are likely to aid. These factors bode well for the quarter under review. We expect pricing to be up 3% in the first quarter.
What the Zacks Model Unveils
Our proven model doesn’t conclusively predict an earnings beat for General Mills this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
General Mills carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -1.38%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With the Favorable Combination
Here are three companies worth considering as our model shows that these have the correct combination to beat on earnings this time.
Constellation Brands, Inc. STZ currently has an Earnings ESP of +1.85% and a Zacks Rank #2. The company is likely to register a top-and-bottom-line increase when it reports second-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for the quarterly earnings per share of $3.36 suggests a roughly 6% increase from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Constellation Brands’ quarterly revenues is pegged at $2.84 billion, suggesting growth of 7.1% from the figure reported in the prior-year quarter. STZ has a trailing four-quarter earnings surprise of 4.4%, on average.
Flowers Foods FLO currently has an Earnings ESP of +0.52% and carries a Zacks Rank #2. The company is likely to register top-line growth when it reports second-quarter fiscal 2023 numbers. The Zacks Consensus Estimate for FLO’s quarterly revenues is pegged at $1.2 billion, indicating a jump of 5.2% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Flowers Foods’ quarterly earnings per share of 28 cents suggests a drop of 6.7% from the year-ago quarter’s levels. FLO has a trailing four-quarter earnings surprise of 7.6%, on average.
Lamb Weston LW currently has an Earnings ESP of +2.70% and a Zacks Rank of 3. LW is likely to witness top-and-bottom-line growth when it reports first-quarter fiscal 2024 results. The Zacks Consensus Estimate for quarterly earnings is pegged at $1.08 per share, suggesting a 44% rise from the year-ago fiscal quarter’s reported number.
The consensus estimate for Lamb Weston’s quarterly revenues is pegged at $1.6 billion, implying a 41.2% increase from the figure reported in the prior-year fiscal quarter. LW delivered an earnings beat of 44.8%, on average, in the trailing four quarters.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
General Mills, Inc. (GIS) : Free Stock Analysis Report
Constellation Brands Inc (STZ) : Free Stock Analysis Report
Flowers Foods, Inc. (FLO) : Free Stock Analysis Report
Lamb Weston (LW) : Free Stock Analysis Report
