General Mills Q2 Adj. Profit Meets View; Affirms FY18 Earnings Outlook

(RTTNews) - Packaged food company General Mills (GIS) on Wednesday reported a nearly 11 percent decline in profit for the second quarter from last year as an increase in sales was offset by higher costs and expenses as well as lower margins.

However, adjusted earnings per share matched analysts' expectations and revenues beat their estimates. Looking ahead, the company affirmed its outlook for full-year adjusted earnings and raised its forecast for organic net sales growth. The company's shares are gaining more than 1 percent in pre-market activity.

The company's second-quarter net income was $430.5 million or $0.74 per share, down from $481.8 million or $0.80 per share in the year-ago period.

Adjusted earnings were $0.82 per share, compared to $0.85 per share in the year-ago period. Constant-currency adjusted earnings per share decreased 5 percent.

On average, 18 analysts polled by Thomson Reuters expected the company to earn $0.82 per share. Analysts' estimates typically exclude special items.

Total segment operating profit was $773 million, down 8 percent in constant currency.

Net sales for the quarter rose 2.1 percent to $4.20 billion from $4.11 billion in the same period last year. Analysts expected revenue of $4.09 billion.

Organic net sales increased 1 percent, with growth across all four operating segments.

Adjusted gross margin decreased 240 basis points from last year, reflecting higher input costs including currency-driven inflation on imported products, as well as unfavorable trade expense phasing.

Looking ahead to fiscal 2018, General Mills updated its key financial targets.

The company affirmed its outlook for full-year constant-currency adjusted earnings per share to increase between 1 and 2 percent and segment operating profit in constant currency to range between flat and up 1 percent.

Organic net sales for the year are now expected to range between flat and down 1 percent, above the previous range of a decline of 1 to 2 percent.

Adjusted operating profit margin for the year is now expected to be below year-ago levels, compared to the previous expectation of year-over-year improvement.