Bearish stock to watch: General Mills, Inc. (NYSE: GIS)

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General Mills, Inc. (NYSE: GIS) stock fell over 7% on 19th March, 2020 (Source: Google finance) though the company raised its adjusted profit growth outlook for 2020, as stockpiling from consumers in North America and Europe amid the rapid spread of the coronavirus increased the demand for its products. The company has ended the quarter with cash and cash equivalents of $606.9 million, long-term debt of $11,589.6 million and total shareholders’ equity of $7,575.1 million. General Mills has generated $2,159.8 million as net cash from operating activities in the first nine months of fiscal 2020. During the same period, the company made capital investments worth $269 million, paid out dividends of $895 million and lowered debt by $862 million.

GIS in the third quarter of FY 20 has reported 7.3% fall in the adjusted earnings per share of 77 cents, beating the analysts’ estimates for the adjusted earnings per share of 75 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue of $4,180.3 million in the third quarter of FY 20, missing the analysts’ estimates for revenue of $4,195 million. Adjusted gross margin decreased by 30 bps to 33.9% due to inflated input costs and elevated supply-chain costs. This was partly made up by HMM savings and improved net price realization and mix. The company posted the adjusted operating profit of $675 million, which fell 8% at cc due to increased SG&A costs, including greater media investments. Also, reduced contributions from ice cream sales in Asia (due to COVID-19) weighed on results. Adjusted operating margin contracted 130 bps to 16.1%.

The company now expects constant-currency adjusted profit per share in 2020 to rise 6% to 8%, compared with an earlier projection of an increase of 3% to 5%. The company expects to see organic sales growth in the fourth quarter of fiscal 2020, due to an extra month of Pet segment results. Organic sales are anticipated to improve 1-2%. The guidance includes the effect of increased orders from retail customers across North America and Europe following the third quarter-end. This, in turn, resulted from higher consumer demand for food. Also, the guidance takes into account traffic-related headwinds at Haagen-Dazs shops and other foodservice networks. The company also expects its supply chain to face minimum bottlenecks through the remaining part of fiscal 2020. Adjusted operating profit (at cc) is expected to increase 4-6% compared with the prior growth projection of 2-4%.

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