General Mills (NYSE: GIS) reported Q4 EPS of $0.79, $0.04 better than the analyst estimate of $0.75. Revenue for the quarter came in at $3.89 billion versus the consensus estimate of $3.81 billion.

Fourth Quarter Results Summary

• Net sales increased 2 percent to $3.89 billion. Organic net sales increased 1 percent, primarily reflecting benefits from organic net price realization and mix across all four operating segments, partially offset by lower organic volume in the North America Retail, Europe & Australia, and Asia & Latin America segments.
• Gross margin increased 180 basis points to 36.5 percent of net sales. Adjusted gross margin, which excludes certain items affecting comparability, increased 70 basis points to 35.8 percent. This was driven by favorable net price realization and mix, as well as benefits from productivity initiatives including a newly implemented global sourcing program.
• Operating profit totaled $561 million, down 8 percent from last year due to higher restructuring, impairment, and other exit costs. Operating profit margin of 14.4 percent decreased 160 basis points. Adjusted operating profit margin increased 170 basis points to 18.5 percent, reflecting higher adjusted gross margin and lower selling, general, & administrative (SG&A) expenses.
• Total segment operating profit of $727 million was up 7 percent in constant currency.
• Net earnings attributable to General Mills totaled $354 million, down 13 percent from a year ago, reflecting lower operating profit and higher net interest expense, partially offset by a lower effective tax rate. Diluted EPS totaled $0.59 compared to $0.69 in the prior year.
• Adjusted diluted EPS, which excludes certain items affecting comparability of results, totaled $0.79 in the fourth quarter, up 8 percent from the prior year. Constant-currency adjusted diluted EPS increased 7 percent, driven by higher adjusted operating profit, partially offset by a 7-point headwind related to Blue Buffalo acquisition financing.

Fiscal 2019 Outlook

"We expect the operating environment in fiscal 2019 to continue to be dynamic, requiring us to increase our agility while remaining laser-focused on delivering on our consumers' expectations," Harmening said. "Our fiscal 2019 targets reflect the investments we're making to enhance our capabilities and accelerate our growth, as well as the impact of adding Blue Buffalo to our portfolio. These initiatives will drive strong returns over the long term and further advance us toward our goal of consistently delivering profitable growth and top-tier returns for our shareholders."

General Mills outlined its key full-year fiscal 2019 targets:

• Organic net sales are expected to be in a range between flat and up 1 percent. Including the impact of the Blue Buffalo acquisition, net sales are expected to increase 9 to 10 percent.
• Constant-currency adjusted operating profit is expected to increase 6 to 9 percent from the base of $2.7 billion reported in fiscal 2018.
• Constant-currency adjusted diluted EPS are expected to range between flat and down 3 percent from the base of $3.11 earned in fiscal 2018. This estimate includes a 4-cent headwind related to the Blue Buffalo acquisition, driven by the impact of purchase accounting.

GUIDANCE:

General Mills sees FY2019 EPS of $3.11, versus the consensus of $3.12.

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