A month has gone by since the last earnings report for General Mills (GIS Quick QuoteGIS - Free Report) . Shares have lost about 4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is General Mills due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

General Mills Q1 Earnings Beat Estimates, Sales Up Y/Y

General Mills posted first-quarter fiscal 2024 adjusted earnings of $1.09 per share, which beat the Zacks Consensus Estimate of $1.08. However, the bottom line fell 1% year over year on a constant-currency (cc) basis. The decline can be mainly attributed to increased net interest expenses and a higher adjusted effective tax rate, somewhat negated by an increased adjusted operating profit and lower net shares outstanding.

The company reported net sales of $4,904.7 million, which came above the Zacks Consensus Estimate of $4,865 million. The top line advanced 4% from the year-ago quarter’s figure. Organic net sales rose 4% due to the favorable organic net price realization and mix, partly countered by the reduced organic pound volume. The top line did not have any impact from net divestiture & acquisition activities or currency movements.

The adjusted gross margin expanded 50 basis points (bps) to 35.4% due to the positive net price realization and mix. This was somewhat offset by elevated input costs in the quarter. The cc adjusted operating profit increased by 2% year over year to $899 million as increased adjusted gross profit dollars were offset by higher adjusted SG&A expenses (which included a double-digit spike in media investments). The adjusted operating profit margin contracted by 40 bps to 18.3%.

Segmental Performance

North America Retail: Revenues in the segment came in at $3,073 million. The metric increased by 3% year over year. The uptick can be attributed to the positive net price realization and mix, which more than offset the reduced pound volume, including a one-point adverse impact from divestitures. Organic net sales grew 4% year over year. The segment’s operating profit increased by 3% to $798 million.

International: Revenues in the segment came in at $715.8 million, up 10% year over year. The upside can be attributed to the favorable net price realization and mix and a one-point benefit from foreign currency exchange. This was partially offset by the reduced pound volume. Organic net sales grew 9% year over year, driven by double-digit growth in distributor markets in Europe & Australia. The segment’s operating profit surged 44% to $50 million.

Pet: Revenues came in at $580 million, which was flat year over year. Revenues were driven by positive net price realization and mix but hurt by the lower pound volume. Organic sales also remained flat. Segment net sales benefited from strong growth in dry pet food, which was offset by declines in pet treats. The segment’s operating profit came in at $111 million, down 10% on a year-over-year basis.

North America Foodservice: Revenues came in at $536 million, up 8% year over year. Net sales were mainly backed by a four-point gain from the TNT Crust buyout. Organic sales rose 4%, including an adverse impact of six points from market index pricing on bakery flour. The segment’s operating profit grew 10% to $59 million, driven by favorable net price realization and mix.

Other Developments & Guidance

Constant currency sales from the joint ventures of Cereal Partners Worldwide increased by 8%. In Haagen-Dazs Japan, sales increased by 4% year over year at constant currency with the prior-year figure.

General Mills expects that the biggest factors impacting its performance in fiscal 2024 are likely to be consumers’ economic status, the moderating rate of 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. Management continues to expect Holistic Margin Management (HMM) cost savings of 4% of the cost of goods sold in fiscal 2024.

For fiscal 2024, organic net sales are anticipated to increase by 3-4%, driven by robust marketing, innovation and in-store support. Gains from net price realization through the company’s Strategic Revenue Management initiative are likely to aid. The net impact of divestitures and foreign currency movements is likely to lower the full-year reported net sales growth by about half a percent. The adjusted operating profit growth at cc is anticipated at 4-6%. Adjusted EPS growth at cc is also envisioned between 4% and 6%. Currency woes are likely to have a negligible impact on adjusted operating profit and adjusted EPS growth. The company expects a free cash flow conversion of at least 95% of adjusted after-tax earnings.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, General Mills has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

General Mills has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.