General Mills (GIS) Readies for Q3 Earnings: Is a Beat Likely?

General Mills, Inc. GIS is likely to register a top-line decline when it reports third-quarter fiscal 2024 earnings on Mar 20. The Zacks Consensus Estimate for revenues is pegged at $4.95 billion, which suggests a decrease of 3.4% from the prior-year quarter’s reported figure.

The consensus mark for quarterly earnings has remained unchanged in the past 30 days at $1.04 per share. This indicates a rise of 7.2% from the year-ago quarter’s reported figure. GIS has a trailing four-quarter earnings surprise of 5.7%, on average.

Factors to Note

General Mills has been benefiting from its brand strength. Many of the company’s brands, like Pillsbury, Totino's, Betty Crocker and Old El Paso, command strong consumer loyalty and affinity built over many years through marketing and innovation. This grants General Mills more pricing flexibility than less established competitors. Through pricing actions and mix optimization, the company has been delivering steady annualized net sales growth.

General Mills, Inc. Price, Consensus and EPS Surprise

General Mills, Inc. Price, Consensus and EPS Surprise

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

Pricing gains also effectively protected profitability in fiscal 2023 by offsetting high input cost inflation. The strength of its brands lends resilience to volumes compared with the broader category. Market leadership and pricing power of GIS’ brand portfolio are likely to have played a positive role in the quarter to be reported. We expect the price/mix to be up 2.3% in the third quarter.

General Mills’ commitment to its three priorities as part of its Accelerate strategy is likely to have aided in the quarter under review. These include competing efficiently through brand building and innovation, enhancing the supply chain by boosting Holistic Margin Management cost savings and curtailing costs, undertaking efficient capital allocation, rewarding shareholders and staying committed to reshaping the portfolio via strategic acquisitions and divestitures.

However, General Mills’ Pet segment sales have been declining year over year for the past few quarters now. Revenues dropped 4% year over year to $569.3 million in the second quarter of fiscal 2024, hurt by reduced pound volume. 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.

Additionally, there is a notable shift in channel performance, with the Pet Retail channel witnessing a double-digit decline in retail sales during the second quarter. This serves as a headwind for the upcoming quarter. Our model suggests a 9% revenue drop for the Pet segment in the third quarter.

General Mills faces ongoing margin pressure from rising production costs. Input cost inflation is estimated to be around 5% for fiscal 2024, driving up the cost of sales. Though moderating from the last year, these increasing expenses continue to squeeze profit margins.

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 has an Earnings ESP of +1.30% and carries a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks With the Favorable Combination

Here are three other companies worth considering as our model shows that these also have the correct combination to beat on earnings this time:

The Hershey Company HSY has an Earnings ESP of +0.72% and a Zacks Rank #3. The company is likely to witness top-line growth when it reports first-quarter 2024 results. The Zacks Consensus Estimate for Hershey’s quarterly revenues is pegged at $3.12 billion, which suggests a rise of 4.3% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Hershey’s quarterly EPS has declined by 2 cents in the past 30 days to $2.72, which suggests a decrease of 8.1% from the year-ago quarter’s level. HSY has a trailing four-quarter earnings surprise of 6.5%, on average.

Newell Brands NWL currently has an Earnings ESP of +10.71% and a Zacks Rank #3. The company is likely to register a top-and-bottom-line decline when it reports first-quarter 2024 numbers. The Zacks Consensus Estimate for Newell’s quarterly revenues is pegged at $1.64 billion, which calls for a drop of 8.9% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Newell’s bottom line stands at a loss of 7 cents, which suggests a decrease of 16.7% from the year-ago quarter’s loss of 6 cents. HSY has a trailing four-quarter earnings surprise of 33.4%, on average.

Service Corporation SCI currently has an Earnings ESP of +1.53% and a Zacks Rank of 3. The company is likely to register top-line and bottom-line decreases when it reports first-quarter 2024 numbers. The Zacks Consensus Estimate for Service Corporation’s quarterly revenues is pegged at $1.01 billion, which implies a dip of 1.5% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Service Corporation’s quarterly earnings of 85 cents suggests a decrease of 8.6% from the year-ago quarter’s levels. SCI has a trailing four-quarter earnings surprise of 6.3%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Newell Brands Inc. (NWL) : Free Stock Analysis Report

Hershey Company (The) (HSY) : Free Stock Analysis Report

General Mills, Inc. (GIS) : Free Stock Analysis Report

Service Corporation International (SCI) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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