General Mills, Inc. (GIS - Free Report) delivered fourth-quarter fiscal 2018 results, wherein both top and bottom lines grew year over year and the latter beat the Zacks Consensus Estimate, after two successive quarters of in-line results.

Shares of the company are up 2.5% during the pre-market trading hours. Further, this Zacks Rank #3 (Hold) company has gained 8% in a month, outpacing the industry’s 6% rise.

Better-than-Expected Q4 Earnings

General Mills reported adjusted earnings per share of 79 cents that increased 8% year over year and came ahead of the Zacks Consensus Estimate of 73 cents. On a constant currency basis, earnings jumped 7%, benefiting from improved adjusted operating profit. However, this was somewhat hurt by hurdles related to financing the Blue Buffalo buyout.

General Mills, Inc. Price, Consensus and EPS Surprise

General Mills, Inc. Price, Consensus and EPS Surprise | General Mills, Inc. Quote

Including one-time items, earnings came in at 59 cents per share, reflecting a 14.5% decrease from 61 cents in the year ago. This was a result of reduced operating profit and increased net interest cost, somewhat compensated by reduced effective tax rate.

Sales

Net sales of $3,890.2 million rose 2.2% year over year, while it fell short of the Zacks Consensus Estimate of $3,910 million. Organic sales increased 1%, same as the preceding quarter. Organic sales growth was fueled by organic net price realization and mix in all segments, somewhat countered by reduced organic volumes across all segments, barring Convenience Stores & Food Service.

Price/mix had a 3-point positive impact on its quarterly revenues, but volumes had a 2-point unfavorable impact on sales. Currency had a 1-point positive impact on quarterly revenues.

Margins

Adjusted gross margin increased 70 basis points (bps) to 35.8% on the back of improved net price realization and mix, along with gains from productivity initiatives such as the company’s recently executed global sourcing program.

Adjusted operating margin also grew 170 bps to 18.5%, courtesy of improved adjusted gross margins and reduced SG&A costs.

Segmental Performance

North America Retail: Revenues from this segment remained almost flat year over year at $2,388 million. The segment noted 2% growth in U.S. Snacks and U.S. Cereal business units, while U.S. Meals & Baking and U.S. Yogurt business units dipped 2% and 5%, respectively. At the Canada unit, sales remained flat with the year-ago period. Organic sales slipped 1%.

Segment operating profit rose 7% on the back of cost-saving efforts and reduced SG&A costs, partly countered by input cost inflation.

Convenience Stores & Food Service: Revenues were up 4.7% year over year at $510.6 million. Growth in the Focus 6 platforms, including frozen meals and snacks, together with gains from market index pricing on bakery flour, had a positive effect on the segment’s results. Organically, sales were up 5%.

Segment operating profit jumped 11% from the year-ago level, backed by improved net price realization and mix, and gains from cost-saving efforts. However, input cost inflation was a hurdle.

Europe & Australia: On a year-over-year basis, the segment’s revenues improved 14% to $556 million, thanks to benefits from favorable currency movements, and better net price realization and mix. Further, sales rose 4% on an organic basis. Increased sales of snack bars, ice creams and Mexican food was partly countered by soft yogurt sales.

However, the segment’s operating profit jumped 37% on a constant-currency basis. This was due to improved net price realization and mix, along with solid cost-saving efforts.

Asia & Latin America: Revenues dipped 1% to $435 million, due to difficult year-over-year comparisons. This was somewhat cushioned by underlying volume growth and gains from net price realization and mix. Organic sales remained flat year over year.

Segment operating profit was down 54.5% year over year, due to greater input costs, elevated SG&A costs, and impacts from differences in the reporting period.

Other Financial Aspects

The company ended fiscal 2018 with cash and cash equivalents of $399 million, long-term debt of $12,668.7 million and total shareholders’ equity of $6,141.1 million.

General Mills generated $2,841.0 million as net cash from operating activities during fiscal 2018, which reflected an 18% growth from the year-ago period. The company made capital investments worth $623 million.

Further, General Mills paid dividends of roughly $1.14 billion, while it repurchased nearly 11 million shares for $602 million.

Other Developments

The company concluded the buyout of Blue Buffalo on Apr 24, 2018. Results of this business will be included in General Mills’ operations, under a new “Pet” segment in the forthcoming periods.

Constant-currency sales from joint ventures of Cereal Partners Worldwide and Häagen-Dazs Japan went down 2% each, in the fourth quarter.

Fiscal 2019 Guidance

Management remains pleased with its fiscal 2018 performance, wherein the company returned to top-line growth. General Mills witnessed organic sales growth, in each of the last three quarters, on the back of solid innovation, effective marketing, and in-store execution. Also, the company remains on track to reshape its portfolio, evident from its buyout of the fast-growing and profitable Blue Buffalo business. In fiscal 2019, management remains focused on its Consumer First strategy as well as working toward its global growth plans to enhance its sales momentum.

All said the company expects organic sales growth in a range of flat to increase 1%. Including Blue Buffalo’s buyout, net sales are anticipated to rise 9-10%.

Adjusted operating profit (on a constant-currency basis) is expected to jump 6-9% year over year. Finally, the company envisions adjusted earnings per share (constant currency) growth in a range of 3% decline to flat, compared with the fiscal 2018 figure of $3.11. This takes into account a 4 cents negative impact from the buyout of Blue Buffalo.

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B&G Foods (BGS  - Free Report), also with a Zacks Rank #2 delivered positive earnings surprise in the last reported quarter.