A Breakdown Of The General Mills Q2 Print

General Mills, Inc. GIS reported Wednesday its fiscal second-quarter earnings, which helped boost shares higher by more than 6 percent.

What Happened

General Mills said it earned 85 cents per share in the second quarter on revenue of $4.411 billion versus expectations of 82 cents per share and $4.52 billion. Operating profit for the quarter fell 23 percent year-over-year due to higher restructuring, impairment and other exit costs. Adjusted operating profit of $765 million was up 8 percent year-over-year.

Why It's Important

Susquehanna Financial Group's Pablo Zuanic highlighted five key takeaways from the earnings report. These include:

• Gross margins of 34.5 percent were flat from a year ago, but 90 basis points ahead of expectations.
• Selling, general and administrative expense/sales of 17.2 percent was down 30 basis points year over year versus expectations of 17.1 percent.
• EBIT margin of 17.3 percent 80 basis points ahead of consensus and up 40 basis points from a year ago.
• Net interest of $112 million was short of the consensus estimate of $120 million.
• The tax rate of 23.8 percent was higher than expectations of 23 percent.

Zuanic maintains a Positive rating on General Mills with an unchanged $48 price target. (See Zuanic's track record here.)

What's Next

Looking forward, management reiterated its full year 2019 guidance, including flat to +1 percent organic net sales, adjusted operating profit to rise 6 to 9 percent, EPS (constant currency) to be between flat and down 3 percent and free cash flow conversion of at least 95 percent of adjusted after-tax earnings.

Shares traded up 6.6 percent to $39.12 at time of publication.

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