General Mills Q2 Earnings Beat Estimates, Net Sales Down 7% Y/Y

General Mills, Inc. (GIS) reported second-quarter fiscal 2026 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Both earnings and net sales declined year over year.The company posted adjusted earnings of $1.10 per share, which beat the Zacks Consensus Estimate of $1.02. The bottom line declined 21% year over year on a constant-currency (cc) basis, attributed to reduced adjusted operating profit and increased adjusted effective tax rate. However, the impact was partially offset by reduced net shares outstanding.General Mills, Inc. Price, Consensus and EPS Surprise General Mills, Inc. price-consensus-eps-surprise-chart | General Mills, Inc. QuoteNet sales dropped 7% to $4,860.8 million, including a six-point headwind from impacts of divestitures and acquisitions. However, the top line surpassed the Zacks Consensus Estimate of $4,775 million. Organic net sales also saw a 1% decline, mainly due to negative organic net price realization and mix.GIS’ Quarterly Margin PerformanceThe adjusted gross margin declined 150 basis points (bps), reaching 34.8% of net sales, mainly due to elevated input costs, partly offset by the favorable net price realization and mix to gross margin, including the product mix benefit from the yogurt divestitures. We expected adjusted gross margin contraction of 250 bps.General Mills’ adjusted operating profit dropped 20% in constant currency, impacted by reduced adjusted gross profit dollars. The adjusted operating profit margin was down 290 bps, reaching 17.4%. We expected an adjusted operating margin of 17.1% for the quarter.Decoding GIS’ Segmental PerformanceNorth America Retail: Revenues in the segment were $2,883.3 million, down 13% year over year, including a 10-point headwind from the divestiture of North American yogurt businesses. Net sales fell by double digits in the Big G Cereal & Canada operating unit, declined by mid-single digits in U.S. Snacks and decreased by low-single digits in U.S. Meals & Baking Solutions. Organic net sales were down 3%. Segment operating profit of $682.3 million fell 21% for both reported and in constant currency, mainly owing to lower volumes and the impacts of the yogurt divestitures.International: Revenues in the segment were $728.9 million, up 6% year over year, including a two-point gain from foreign currency. Organic net sales increased 4%, backed by growth in Brazil, China, India and North Asia. Segment operating profit increased to $28.4 million from $23.8 million a year ago, reflecting favorable pricing, improved mix and higher volumes, partially offset by increased selling, general and administrative (SG&A) expenses.North America Pet: Revenues rose 11% year over year to $660.4 million, including a 10-point contribution from the acquisition of North American Whitebridge Pet Brands. Net sales rose by double digits in cat food and pet treats, while dog food declined by low-single digits. Organic net sales increased 1%. Segment operating profit dropped 12% to $123.1 million, impacted by increased input costs and elevated SG&A expenses, including investments supporting the launch of Love Made Fresh. These pressures were partially offset by favorable pricing, product mix and higher volume.North America Foodservice: Revenues were $581.8 million, which decreased 8%, including a 7-point headwind from yogurt divestitures. Organic net sales were roughly flat year over year, with growth in frozen baked goods, cereal and frozen meals offset by declines in bakery flour, including a 3-point impact from index pricing. Segment operating profit dropped 12% to $104.8 million, with the headwind from the yogurt divestitures mainly offset by growth in the remaining business.GIS’ Financial Health Snapshot & Other DevelopmentsGeneral Mills ended the quarter with cash and cash equivalents of $683.4 million, long-term debt of $12,160.2 million and total stockholders’ equity (excluding noncontrolling interests) of $9,316.4 million.General Mills generated $1,216.3 million in cash from operating activities in the six months ended Nov. 23, 2025. Capital investments amounted to $253.1 million during the same period. The company paid out dividends worth $659 million and bought shares for $500 million in the aforementioned period.What to Expect From GIS in Fiscal 2026?General Mills’ top priority for fiscal 2026 is to revive volume-driven organic sales growth amid a challenging consumer environment. The company anticipates category growth to come below its long-term expectations, with less benefit from price/mix.The company plans increased investment in value, innovation, product news and brand building, including the launch of Blue Buffalo in the U.S. fresh pet food segment in the fiscal second quarter. Still, these growth efforts, along with input cost inflation and tariffs, are expected to exceed savings initiatives. Additionally, yogurt divestitures and the Whitebridge Pet acquisition are projected to reduce adjusted operating profit growth about five points in fiscal 2026.The company has reaffirmed its fiscal 2026 outlook. Organic net sales are projected to range from a 1% decline to a 1% increase, while adjusted operating profit and adjusted earnings per share (EPS) are expected to decline 10-15% in constant currency. Free cash flow conversion is anticipated to be at least 95% of adjusted after-tax earnings. The net impacts of divestitures, acquisitions, foreign currency and the 53rd week are likely to reduce net sales by about 4%. Foreign currency exchange is not likely to have a material effect on adjusted operating profit or adjusted EPS growth.This Zacks Rank #3 (Hold) company’s shares have lost 4.5% in the past three months compared with the industry’s decrease of 7.1%.Image Source: Zacks Investment ResearchStocks to Consider in the Consumer Staples SpaceUnited Natural Foods, Inc. (UNFI) distributes natural, organic, specialty, produce and conventional grocery and non-food products in the United States and Canada. At present, United Natural flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The consensus estimate for United Natural’s current fiscal-year sales and earnings implies growth of 1% and 187.3%, respectively, from the year-ago figures. UNFI delivered a trailing four-quarter earnings surprise of 52.1%, on average.Village Farms International, Inc. (VFF) produces, markets and distributes greenhouse-grown tomatoes, bell peppers, cucumbers and mini-cukes in North America. It sports a Zacks Rank #1. Village Farms delivered a trailing four-quarter earnings surprise of 155.6%, on average. The Zacks Consensus Estimate for Village Farms’ current fiscal-year earnings indicates growth of 165.6% from the prior-year levels. The Vita Coco Company, Inc. (COCO) develops, markets and distributes coconut water products under the Vita Coco brand name. COCO currently flaunts a Zacks Rank #1. Vita Coco delivered a trailing four-quarter earnings surprise of 30.4%, on average.The Zacks Consensus Estimate for Vita Coco's current fiscal-year sales and earnings implies growth of 18% and 15%, respectively, from the year-ago figures.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Vita Coco Company, Inc. (COCO): Free Stock Analysis Report General Mills, Inc. (GIS): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report Village Farms International, Inc. (VFF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks