A month has gone by since the last earnings report for General Mills (GIS Quick QuoteGIS - Free Report) . Shares have added about 3.3% in that time frame, outperforming the S&P 500.

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

General Mills Q4 Earnings Top Despite Adverse Pricing

General Mills posted fourth-quarter fiscal 2024 adjusted earnings of $1.10 per share, which beat the Zacks Consensus Estimate of 99 cents. However, the bottom line declined 10% year over year on a constant-currency (cc) basis. The downside can be attributed to the lower adjusted operating profit, elevated net interest expenses and an increased adjusted effective tax rate, partly made up by reduced shares outstanding.

GIS reported net sales of $4,713.9 million, which fell short of the Zacks Consensus Estimate of $4,873 million. Also, the top line decreased 6% due to the adverse net price realization and mix, along with reduced pound volume. Organic net sales tumbled 6% and slowed down sequentially due to lower retailer inventory, International unit hurdles and comparison of trade expense timing. We had expected organic sales to decline 2.4% in the fourth quarter.

The adjusted gross margin contracted 10 basis points (bps) to 34.9%. This could be attributed to input cost inflation, supply chain deleverage, and adverse net price realization and mix, somewhat made up by HMM cost savings and reduced other supply-chain costs. We had expected the adjusted gross margin to contract 60 bps to 34.4% in the quarter under review.

The adjusted operating profit came in at $800 million, down 10% at cc due to the reduced adjusted gross profit, partially compensated by lower SG&A costs. The adjusted operating profit margin contracted 70 bps to 17%.

North America Retail: Revenues in the segment came in at $2,853.3 million, down 7% year over year due to reduced pound volume, and adverse net price realization and mix. Organic net sales also tumbled 7%. The segment’s operating profit declined by 14% to $670 million.

International: Revenues in the segment came in at $667.5 million, down 10% year over year due to adverse net price realization and mix and currency headwinds, partly made up by increased pound volume. Organic net sales also fell 10% due to softness across China and Brazil. The segment’s operating profit slumped from $67 million to $22 million.

Pet: Revenues came in at $602.1 million, down 8% year over year. Revenues were hurt by reduced pound volume, as well as unfavorable net price realization and mix. Segmental organic sales also declined 8%. The segment’s operating profit came in at $144 million, up 8% on a year-over-year basis.

North America Foodservice: Revenues came in at $589 million, up 4% year over year. Also, organic net sales improved 4% from the year-ago quarter’s level. Sales growth was driven by solid growth across breads, cereal and frozen biscuits. The segment’s operating profit grew 9% to $79 million.

Other Financial Aspects & Guidance

The company paid out dividends worth $1.4 billion and bought nearly 29 million shares for $2 billion in fiscal 2024. Additionally, management announced a 2% hike to its quarterly dividend, taking it to 60 cents per share. This is payable on Aug 1, 2024 to shareholders of record as of Jul 10.

Constant-currency sales from the joint ventures of Cereal Partners Worldwide increased 2% in the fourth quarter. In Haagen-Dazs Japan, sales went down 3% year over year at cc from the prior year’s figure.

Despite ongoing economic uncertainty affecting consumers in its main markets, General Mills anticipates a gradual improvement in volume trends for its categories in fiscal 2025. However, the overall category dollar growth for the year is likely to fall short of the company's long-term growth targets. To boost organic net sales, General Mills aims to create robust experiences with its top food brands, which should lead to better household penetration and increased market share compared to the previous year.

In fiscal 2025, General Mills plans to launch new products and innovations centered on taste, health, convenience and value. Additionally, the company expects to achieve cost savings of around 4-5% of the cost of goods sold through HMM initiatives. Apart from this, the company plans to reinvest any potential margin gains back into the business, considerably boosting its investment in brand-building efforts to enhance volume performance in fiscal 2025.

For fiscal 2025, organic net sales are anticipated to range between a flat and a 1% increase. The adjusted operating profit growth at cc is anticipated between a decline of 2% and flat. Management anticipates adjusted earnings per share (EPS) growth between down 1% and an increase of 1% at cc. The company envisions 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 revision have trended downward during the past month.

The consensus estimate has shifted -7.92% due to these changes.

VGM Scores

At this time, General Mills has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise General Mills has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.