General Mills beats by $0.06, beats on revs; guides FY17; raises cost reduction, margin expansion target; raises dividend 4% (65.76)
- Reports Q4 (May) earnings of $0.66 per share, excluding non-recurring items, $0.06 better than the Capital IQ Consensus of $0.60; revenues fell 8.6% year/year to $3.93 bln vs the $3.86 bln Capital IQ Consensus.
- Pound volume reduced net sales growth by 7 percentage points, and net price realization and mix reduced net sales growth by 1 point. Foreign currency exchange effects reduced net sales growth by 1 point. On a constant-currency basis, net sales decreased 8 percent. The impact of one less week and the net impact of acquisitions and divestitures subtracted 9 points of growth.
- Gross margin declined 20 basis points, reflecting higher input cost inflation in the quarter. Adjusted gross margin declined 130 basis points. Operating profit increased 26 percent to $532 million. Total segment operating profit decreased 18 percent to $654 million.
- Guidance:
- Overall, the company expects this focused approach will result in fiscal 2017 organic net sales growth ranging from flat to down 2 percent compared to 2016, but deliver a 6 to 8 percent increase in constant-currency total segment operating profit. Fiscal 2017 adjusted operating profit margin is expected to increase by ~150 basis points, with constant-currency adjusted diluted EPS growing 6 to 8 percent from the base of $2.92 earned in fiscal 2016 The company estimates a 1-2 cent headwind to fiscal 2017 adjusted diluted EPS from currency translation, though this figure does not reflect recent fluctuations in the British pound (so ~$3.08-3.14 ex-Pound impact, may not compare to $3.04 est).
- Looking ahead to fiscal 2018, General Mills expects modest organic net sales growth and the full benefit of its margin expansion efforts will drive adjusted operating profit margin to 20 percent, resulting in a low double-digit constant-currency increase in adjusted diluted EPS.
- General Mills now expects its previously announced cost-reduction and organizational efficiency initiatives -- including Projects Century, Catalyst, and Compass, as well as administrative cost reductions delivered through zero-based budgeting -- to generate total annual savings of $600 million by fiscal 2018, up from the previous target of $500 million.
- The company also announced it is undertaking further efforts to prioritize investments, reduce complexity, and streamline its operations to drive profitable sales growth. As a result, General Mills is increasing and accelerating its previous margin expansion target. The company now expects to achieve an adjusted operating profit margin of 20 percent by fiscal 2018, an increase of 400 basis points over fiscal 2015 levels.
- Co raises quarterly dividend 4% to $0.48 from $0.46 -- eighth increase in General Mills' quarterly dividend rate since 2010