General Mills, Inc. GIS delivered third-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate. Earnings increased year over year while net sales remained almost unchanged. Management raised fiscal 2022 guidance, courtesy of year-to-date performance along with projections of solid top-and bottom-line growth in the fiscal fourth quarter.

Management expects at-home food demand to stay above pre-pandemic levels, as people are spending more time working from home. A higher pet population and more humanization and premiumization of pet food amid the pandemic are tailwinds for the company’s pet food category.

GIS is progressing well with the Accelerate strategy, which aims to drive sustainable, profitable growth and robust shareholder returns. General Mills is on track with prioritizing core markets, global platforms and local brands along with reshaping its portfolio via strategic acquisitions and divestitures.

General Mills, Inc. Price and Consensus

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

Quarterly Highlights

Adjusted earnings per share (EPS) of 84 cents rose 2% year over year on a constant-currency (cc) basis. The upside can be mainly attributed to lower net interest expenses, increased after-tax earnings from joint ventures as well as reduced net earnings attributable to redeemable and non-controlling interests. These were somewhat offset by reduced adjusted operating profit. The bottom line surpassed the Zacks Consensus Estimate of 77 cents per share. On a two-year compound growth basis, adjusted EPS rose 4% at cc.

Net sales of $4,537.7 million remained essentially unchanged from the year-ago quarter’s figure. The metric included a 3-point net unfavorable impact from divestiture and acquisition activity. Organic net sales rose 4% on the back of favorable organic net price realization and mix to the tune of 7 points. This was somewhat offset by a 4-point negative impact from reduced organic pound volume. The top line surpassed the Zacks Consensus Estimate of $4,508.9 million. Net sales rose 4%, while organic sales increased 5% from third-quarter fiscal 2020 levels.

Adjusted gross margin contracted 160 basis points (bps) to 31.4% due to input cost inflation, supply chain deleverage and escalated other costs of goods sold. These were somewhat offset by positive net price realization and mix as well as cost savings from Holistic Margin Management (HMM).

Adjusted operating profit margin contracted 90 bps to 14.9%.

Segmental Performance

In third-quarter fiscal 2022, General Mills unveiled a new organizational structure. As a result, it will now report results in the following fourth operating segment.

North America Retail: Revenues in the segment came in at $2,811.9 million, up 1% year over year. The uptick can be attributable to positive net price realization and mix, which somewhat offset reduced pound volume. Organic net sales inched up 1% year over year and 6% on a two-year compound growth basis in the segment.

International: Revenues in the segment came in at $721 million, down 23% year over year. Revenues reflect a 20-point adverse impact from divestitures of the European yogurt and dough businesses as well as 2 points of unfavorable foreign currency translation. Organic net sales inched down 1% year over year but rose 4% on a two-year compound growth basis in the segment.

Pet Segment: Revenues came in at $567.7 million, up 30% year over year on the back of solid volume growth and positive net price realization as well as mix. Net sales included 14 points of gains from the pet treats business buyout (concluded on Jul 6, 2021). Organic sales increased 16% year over year.

North America Foodservice: Revenues came in at $437.1 million, up 22% year over year on the back of volume growth and positive net price realization as well as mix. On a two-year compound growth basis, net sales declined 3% in the segment.