General Mills (NYSE:GIS) Exceeds Q3 Expectations
Packaged foods company General Mills (NYSE:GIS) met Wall Street’s revenue expectations in Q3 CY2024, but sales fell 1.2% year on year to $4.85 billion. Its non-GAAP profit of $1.07 per share also met analysts’ consensus estimates.
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General Mills (GIS) Q3 CY2024 Highlights:
- Revenue: $4.85 billion vs analyst estimates of $4.8 billion (in line)
- EPS (non-GAAP): $1.07 vs analyst expectations of $1.06 (in line)
- Company reaffirms full-year fiscal 2025 outlook
- Gross Margin (GAAP): 34.8%, down from 36.1% in the same quarter last year
- EBITDA Margin: 20%, down from 21.1% in the same quarter last year
- Free Cash Flow Margin: 10%, up from 4.8% in the same quarter last year
- Organic Revenue fell 1% year on year (4% in the same quarter last year)
- Sales Volumes were flat year on year (-2% in the same quarter last year)
- Market Capitalization: $41.47 billion
“Our top priority in fiscal 2025 is to accelerate our organic net sales growth, and we made expected progress on that goal in the first quarter along multiple fronts, with more work still ahead,” said General Mills Chairman and Chief Executive Officer Jeff Harmening.
Best known for its portfolio of powerhouse breakfast cereal brands, General Mills (NYSE:GIS) is a packaged foods company that has also made a mark in cereals, baking products, and snacks.
Shelf-Stable Food
As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.
Sales Growth
General Mills is one of the largest consumer staples companies and benefits from a strong brand, giving it customer trust and leverage in many purchasing and distribution negotiations.
As you can see below, the company’s annualized revenue growth rate of 2.7% over the last three years was sluggish as the number of units it sold was more or less the same each year. We’ll explore what this means in the "Volume Growth" section.
This quarter, General Mills reported a rather uninspiring 1.2% year-on-year revenue decline to $4.85 billion in revenue, in line with Wall Street’s estimates. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.
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Volume Growth
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
To analyze whether General Mills generated its growth (or lack thereof) from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.
Over the last two years, General Mills’s quarterly sales volumes have, on average, stayed about the same. This is normal for a consumer staples company, where demand typically doesn’t see much volatility. Its stable sales volumes combined with its flat organic sales also imply the company didn’t change the prices for its products.
In General Mills’s Q3 2025, year on year sales volumes were flat. This result was a well-appreciated turnaround from the 2% year-on-year decline it posted 12 months ago, showing the company is heading in the right direction.
Key Takeaways from General Mills’s Q3 Results
We were impressed that General Mills exceeded analysts’ organic revenue growth expectations this quarter. However, revenue was only in line. A major negative was that its gross margin missed analysts’ expectations. Looking ahead, the company reaffirmed full year guidance, which called for flat to 1% organic revenue growth. This is muted. Overall, this was a quarter without many surprises. The stock traded down 1.3% to $73.50 immediately after reporting.
Should you buy the stock or not? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
