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General Mills Likely to Miss Quarterly Earnings Estimates on Inflation, Shipment Timing, RBC Says

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General Mills Likely to Miss Quarterly Earnings Estimates on Inflation, Shipment Timing, RBC Says

General Mills (GIS) is likely to fall short of market consensus on its fiscal first-quarter earnings amid peak inflation, lower cost savings, and shipment timing headwinds, RBC Capital Markets said in a Monday client note.

The brokerage expects the foods company to report per-share earnings of $0.71 for the first quarter, compared with the consensus of $0.72. The maker of Cheerios cereal is scheduled to release its latest financial results on Wednesday. Analysts polled by FactSet are looking for GAAP and non-GAAP EPS of $0.73 and $0.72, respectively.

"We sit below consensus on the bottom line given that (the first quarter) faces the highest inflation, costs savings will likely be at their lowest for the year, and shipment timing headwinds lead to lower volumes/volume deleverage," RBC's co-head of global consumer and retail research, Nik Modi, wrote in the note.

RBC is expecting General Mills to record sales of $4.34 billion for the quarter, while the Street is looking for $4.35 billion.

North America retail sales have tracked down about 1.7%, in line with the roughly 2% decline management cited in June, Modi said. The brokerage forecasts that organic sales in the segment will fall 3.5% in the quarter, assuming a negative impact of 1% to 1.5% from shipment timing.

Consumption trends in the company's North America pet division were flat on a yearly basis, while RBC's estimates for the foodservice and international segments are "ahead" of consensus.

"All in all, we believe that (General Mills) will be able to meet topline expectations," Modi said.

RBC also expects General Mills to reiterate its full-year outlook, which the company reaffirmed on Sept. 8. At the time, the company said it continued to anticipate adjusted EPS in a range of $3 to $3.20 for fiscal 2027 and organic net sales ranging from a 1.5% decline to growth of 0.5%.

The Street is looking for non-GAAP EPS of $3.08 and reported sales to decrease by 3.4%.

"Consumption data is tracking in line with the company's expectations," Modi said. "Management noted that it is aware of the current increasing cost inflation environment and added that its estimate for (4% to 5%) inflation this year is still intact."

RBC has an outperform rating on General Mills with a price target of $45.

Last month, rival food producer J.M. Smucker (SJM) lifted its full-year outlook after recording stronger-than-expected fiscal first-quarter results. Packaged food company Kraft Heinz (KHC) narrowed its full-year earnings guidance in August.

Price: $36.03, Change: $-0.30, Percent Change: -0.81%

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