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General Mills, Inc. (GIS - Free Report) is likely to register a top and bottom-line decline when it reports fourth-quarter fiscal 2024 earnings on June 26. The Zacks Consensus Estimate for revenues is pegged at $4.87 billion, which indicates a 3.1% decrease from the year-ago period.

The consensus mark for quarterly earnings has declined by a penny in the past 30 days to 99 cents per share. This indicates a drop of 11.6% from the year-ago quarter’s reported figure. However, GIS has a trailing four-quarter earnings surprise of 7.2%, on average.

For fiscal 2024, the Zacks Consensus Estimate for revenues stands at $20.02 billion, which calls for a 0.4% dip from the year-ago period. The consensus estimate for EPS is pegged at $4.50, which suggests 4.7% growth year over year.
 

General Mills, Inc. Price, Consensus and EPS Surprise

General Mills, Inc. price-consensus-eps-surprise-chart | General Mills, Inc. Quote
 

Factors to Note

General Mills’ Pet segment sales have been declining year over year for the past few quarters now. Revenues dropped 3% year over year to $624.5 million in the third quarter of fiscal 2024, hurt by the reduced pound volume. Segmental organic sales also declined 3%. Sales fell due to softness in treats and dry food owing to Wilderness. The macro-environment in the United States continues to serve as a hindrance to premium pet food, with pet owners showing an increased preference for value-oriented packs.

Although results improved sequentially in the third quarter, management stated that it still has a lot more work left in its Pet Retail channel and Wilderness line. We expect an organic revenue decline of 6.5% in the Pet segment in the fourth quarter.

Additionally, General Mills faces ongoing margin pressure from rising production costs. Although offset by the price/mix and Holistic Margin Management (“HMM”) cost savings, the adjusted gross margin in the third quarter of fiscal 2024 was partly hurt by input cost inflation, increased other supply chain costs and supply chain deleverage. Management anticipates continued input cost inflation on its cost of goods sold during the fourth quarter. Though moderating from the last year, these increasing costs remain a hindrance to profit margins.

However, General Mills’ focus on the Accelerate strategy has been working well.  For fiscal 2024, this multi-year strategy centers on three priorities. These include enhancing competitive edge through impactful brand development, fostering innovation and utilizing the company’s strengths to succeed in an evolving consumer landscape. Further, management is dedicated to enhancing supply-chain efficiency, emphasizing HMM savings and mitigating costs associated with disruptions in the supply chain.

Apart from this, the company has been benefiting from the strength of its brands and robust pricing actions.  Pricing gains effectively protected profitability in fiscal 2023 by offsetting high input cost inflation. Our model suggests the price/mix to be up 0.7% in the fourth quarter.
 

What the Zacks Model Unveils

Our proven model predicts 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 the case here.

General Mills currently carries a Zacks Rank #3, and it has an Earnings ESP of +0.58%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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