U.S. Markets open in 6 hrs 32 mins

Why General Mills, Inc. Stock Has Dropped 24.3% in 2018

Travis Hoium, The Motley Fool

What happened 

Shares of food giant General Mills, Inc. (NYSE: GIS) have fallen 24.3% in 2018, according to data from S&P Global Market Intelligence, as operating results have come in lower than expected. 

So what 

Most of the drop in shares occurred after fiscal third-quarter results were released in March. Management said higher transportation costs were affecting margins and lowered constant currency operating profit guidance, from a range of down 1% to flat to a new range of down 5% to 6%. 

Cereal in a blue bowl on a wood table.

Image source: Getty Images.

The market also didn't have a very positive reaction to the $8 billion Blue Buffalo acquisition that was closed in April. Blue Buffalo gets General Mills into the pet food business, which is growing quickly at the moment, but it comes at a high cost, with the deal costing 25 times the $319 million of adjusted EBITDA the company generated in 2017. 

Now what 

As disappointing as the first few months of the year were for General Mills, fiscal fourth-quarter results brought a little redemption. Organic revenue grew 1%, and guidance for fiscal 2019 included a 9% to 10% growth target and an increase in constant currency operating profit of 6% to 9%. Acquisitions and price increases should help General Mills return to growth in 2019, although whether that will help push the stock higher remains to be seen. 

More From The Motley Fool

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.