General Mills (NYSE:GIS) reported Q4 EPS of $1.12, $0.11 better than the analyst estimate of $1.01. Revenue for the quarter came in at $4.9 billion versus the consensus estimate of $4.8 billion.
Fiscal 2023 Outlook:
General Mills expects the largest factors impacting its performance in fiscal 2023 will be the economic health of consumers, the inflationary cost environment, and the frequency and severity of disruptions in the supply chain. The company anticipates double-digit inflation on its cost of goods sold in fiscal 2023 and is addressing inflation headwinds with HMM cost savings and net price realization generated through its SRM capability. The company is planning for volume elasticities to increase but remain below historical levels and supply chain disruptions to slowly moderate in fiscal 2023 compared to fiscal 2022 levels.
General Mills has announced a series of portfolio reshaping transactions over the past year that are expected to increase the company’s top- and bottom-line growth profile over the long term. The company estimates the net impact of these transactions will reduce fiscal 2023 adjusted operating profit growth and adjusted diluted EPS growth by approximately 3 percent each, driven by the impact of foregone operating profit and stranded costs related to the divested businesses, partially offset by incremental profit from the acquired businesses. The company expects the net proceeds from the divestitures will support an increased share repurchase plan in fiscal 2023, resulting in a 2 to 3 percent net reduction in its average diluted share count for the year, which is above its long-run target of a 1 to 2 percent annual net share count reduction.
With these assumptions in mind, General Mills outlined its key full-year fiscal 2023 financial targets:
- Organic net sales are expected to increase 4 to 5 percent.
- Adjusted operating profit is expected to range between down 2 percent and up 1 percent in constant currency from the base of $3.2 billion reported in fiscal 2022, including a 3-point net headwind from divestitures and acquisitions announced or closed in fiscal 2022.
- Adjusted diluted EPS are expected to range between flat and up 3 percent in constant currency from the base of $3.94 earned in fiscal 2022, including a 3-point net headwind from divestitures and acquisitions announced or closed in fiscal 2022.
- Free cash flow conversion is expected to be at least 90 percent of adjusted after-tax earnings.
- The net impact of divestitures, acquisitions, and foreign currency exchange is expected to reduce full-year reported net sales growth by approximately 3 percent, and foreign currency exchange is expected to reduce adjusted operating profit and adjusted diluted EPS growth by approximately 1 percent.