General Mills (GIS): A Recipe for Growth or Stagnation? |
Cheerios aren’t selling like they used to. General Mills’ (GIS) recent earnings showed slowing revenue growth as consumers tighten their belts and shift toward cheaper alternatives. The company’s margins remain strong, but sales of its iconic brands have started to cool off. Despite this, search volume by financial pros remains surprisingly high, ranking third among packaged food companies according to our TrackStar data. The question isn’t whether General Mills can survive – it’s whether it can thrive in an increasingly competitive landscape. General Mills’ Business General Mills has fed Americans since 1866, when it started as a single flour mill and grew into a global food empire with over 100 brands across 100+ countries. The company sells breakfast cereals, snacks, pet food, and convenient meals through retail stores, foodservice, and e-commerce channels, with annual revenue near $20 billion. General Mills segments its business into the following areas:
The company’s latest quarter showed a 2.4% drop in year-over-year sales, while operating profit jumped 33% to $1.1 billion due to cost savings and better efficiency. To fight slower growth, General Mills launched its “Accelerate” strategy with focus on brand building, innovation, and scale while it keeps strong margins. |
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Recently, the company agreed to buy Whitebridge Pet Brands for $1 billion to boost its position in premium pet food, especially in wet cat food. It also plans to sell its North American yogurt business for $2 billion to focus on faster-growing segments. Financials
Source: Stock Analysis The story of General Mills’ financials reads like a tale of smart defense rather than ambitious offense. Over the past five years, revenues slid backward instead of forward, dropping from $20.1 billion to $19.9 billion. Yet profits rose as management found ways to squeeze more from less. The secret? Cost control. As sales declined 1.5% in the last twelve months, the company cut expenses even faster. This kept the gross margin healthy at 35.3% but hints at limited pricing power with consumers. Operating income paints a brighter picture, climbing to $3.8 billion from $3.1 billion five years ago. However, this win came from penny-pinching rather than growth, with SG&A expenses locked at $3.2 billion. The balance sheet carries more weight these days. Interest expenses swelled to $511 million from $385 million in 2018, a result of taking on debt for acquisitions. Yet strong cash generation more than covers these costs. Speaking of cash, the company turned $3.6 billion from operations into $2.8 billion in free cash flow. This marks solid improvement from $2.2 billion in 2018 and easily covers the $676 million in dividends and $567 million in share buybacks. Valuation
Source: Seeking Alpha General Mills sells at 14.8x forward earnings, equal to Campbell Soup (CPB) but above Kraft Heinz (KHC) at 10.4x. The company’s price-to-cash flow ratio of 10.3x falls below Hormel’s (HRL) 13.9x but above Kraft’s 9.1x. This suggests investors pay a fair price for General Mills’ cash generation abilities. Growth
Source: Seeking Alpha Recent results tell a mixed story. Revenue fell 2.4% from last year, but the three-year growth rate of 2.7% beats most competitors. Analysts expect small changes ahead, with revenue set to drop 0.3%, which is better than Kraft’s 0.5% expected fall but worse than Campbell’s 4.0% predicted rise. Profitability
Source: Seeking Alpha General Mills leads in profit metrics with a 34.7% gross margin that matches KHC and beats HRL’s 17.0%. The company’s 24.2% return on equity tops all peers, while its 9.1% return on assets shows strong operations.
Our Opinion 6/10 General Mills pairs high profits with steady cash flow, which makes it ideal for investors who want income. The moves into pet food and focus on key brands show smart planning, while the company keeps industry-leading margins. But slower revenue growth and more competition in key product lines could limit gains in the near term. This stock won’t deliver explosive growth, but it offers efficient operations and reliable returns – perfect for investors who prefer stability to excitement. |
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Proprietary Data Insights Financial Pros’ Top Packaged Foods Stock Searches in the Last Month
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