General Mills Analysis – September 2023

General Mills (NYSE: GIS) is a publicly-listed consumer-defensive company that focuses on packaged foods. It has had a rough year with its stock price down almost 18% from a year ago. Is it a buying opportunity?

Compared to its peers, it is fairly valued but generally more profitable with higher-quality and healthier products. The company has its share of cheap, unhealthy products that are more affordable. As the current cost of living crisis spirals into speeding changes by consumers, General Mills is well placed to benefit from it, while simultaneously pocketing profits from higher-priced premium items. As the world grows richer, the company’s products will expand beyond North America (currently its most valuable market) and compete directly with other brands abroad. Here’s more about the company:

Brands:
Cereal: Cheerios, Cinnamon Toast Crunch, Cocoa Puffs, Lucky Charms, Raisin Nut Bran, Reese’s Puffs, Wheaties
Baking: Betty Crocker, Bisquick, Pillsbury
Ice Cream: Haagen-Dazs (Operates European distribution, licensed U.S. Segment to Nestlé)
Meals: Annie’s, Old El Paso, Totino’s
Organic/Natural: Liberté Yoghurt,  Larabar
Snacks: Chex Mix, Dunkaroos, Fiber One, Nature Valley, Yoplait
Pet food: Blue Buffalo

Net sales FY2023 in Millions:
North America Retail: $12,659.9 (up from $9,925 in 2019)
International: $2,769.5 (down from $3,539 in 2019)
Pet: $2,473.3 (up from $1,430.9 in 2019)
North America Foodservice: $2,191.5 (up from $1,969 in 2019)

North America Retail Segments:
U.S. Meals & Baking Solutions: $4,426.3 (up from $3,839 in 2019)
U.S. Morning Foods: $3,620.1 (up from $2,255 in 2019)
U.S. Snacks $3,611.0 (up from $2,060 in 2019)
Canada: $1,002.5 (up from $862 in 2019)

Profit Margin: 12.07% (Kellogg’s: 5.46%, Kraft-Heinz: 11.65%, J.M. Smucker: -0.21%, Conagra: 5.57%, Nestlé: 10.13%, PepsiCo: 8.77%)
Return on Equity: 23.12% (K: 19.96%, KHC: 6.38%, SJM: -0.23%, CAG: 7.73%, NSRGY: 24.33%, PEP: 43.69%)
Beta: 0.23 (K: 0.42, KHC: 0.68, SJM: 0.23, CAG: 0.54, NSRGY: 0.31, PEP: 0.55)
52-Week Change in Stock Price: -17.58% (K: -17.34%, KHC: 1.40%, SJM: -9.76%, CAG: -17.20%, NSRGY: 3.09%, PEP: 1.78%)
Revenue from $17,626bn (2019) to $20,281bn (Year to Sept. 2023)
Gross profit increased from $6,129bn (2019) to $6,868bn (Year to Sept. 2023)
Dividend of 3.62% at a sustainable 53.90% payout ratio
Near at 52-week low.

Company guidance for FY2024:
1. Organic net sales are expected to increase 3 to 4 percent.
2. Adjusted operating profit is expected to increase 4 to 6 percent in constant currency.
3. Adjusted diluted EPS is expected to increase 4 to 6 percent in constant currency.
4. Free cash flow conversion is expected to be at least 95 percent of adjusted after-tax earnings.
5. 2% share-buyback programme

Value-oriented consumers will dominate sales over the next little while until inflation settles down which is expected to be, at the earliest, by the end of the year. An expansion abroad of its healthier (yoghurts and granola bars) and more premium products (pet food) will add to its bottom line and hopefully revive its international segment after shrinking over the past few years.

Disclaimer: I do not own any shares of General Mills.