Core Viewpoint - The analysis expresses a pessimistic outlook on General Mills (GIS), with a previous recommendation to sell the stock, which has continued to decline since the last analysis [1]. Group 1: Company Performance - General Mills has been identified as a company with limited risks and decent to high upside potential, emphasizing the importance of understanding ownership in investments [1]. Group 2: Investment Philosophy - The investment philosophy highlighted focuses on seeking undervalued stocks, with a contrarian approach being favored for better investment ideas [1].

General Mills, Inc. ( GIS ) is one of the most popular defensive staple stocks that has been moving south all year long, losing 26% of its market cap. After its peak in May 2023, the stock hasI’m a long-term investor focused on U.S. and European equities, with a dual emphasis on undervalued growth stocks and high-quality dividend growers. Through years of experience, I’ve learned that sustained profitability—evident in strong margins, stable and expanding free cash flow, and high returns on invested capital ...

Core Insights - General Mills, Inc. (GIS) has experienced a significant decline in its market cap, losing 26% throughout the year, particularly after reaching its peak in May 2023 [1] Company Performance - The stock of General Mills has been categorized as a defensive staple stock, indicating its role in providing stability during market fluctuations [1] Investment Strategy - The focus on sustained profitability is emphasized, highlighting the importance of strong margins, stable and expanding free cash flow, and high returns on invested capital as key drivers of returns [1]

Core Viewpoint - Genesis Healthcare is set to auction its 175 long-term nursing homes in January after a judge rejected an insider bid that would have maintained the current ownership structure [1] Group 1 - The upcoming auction is a response to the refusal of a judge to approve an insider bid [1] - The insider bid would have allowed the same ownership group to remain in control of the nursing homes [1]

Core Insights - General Mills, Inc. reported second-quarter results that exceeded expectations, with adjusted earnings of $1.10 per share, surpassing analyst estimates of $1.02 [2] - The company's net sales totaled $4.9 billion, above the consensus estimate of $4.78 billion, despite a 7% year-over-year decline [2] - Shares rose more than 3% intra-day following the earnings release [1] Financial Performance - Adjusted operating profit fell 20% in constant currency terms to $848 million, with adjusted operating margin contracting 290 basis points to 17.4% [3] - The North America Retail segment, the largest by revenue, experienced a 13% decline in net sales, including a 10-point drag from yogurt divestitures [3] - Organic net sales declined 1% from a year earlier [2] Segment Performance - The North America Pet segment saw net sales rise 11%, supported by the acquisition of Whitebridge Pet Brands [4] - The International segment delivered growth, with net sales increasing 6% due to strong performance in Brazil, China, India, and North Asia [4] Future Outlook - General Mills reaffirmed its fiscal 2026 outlook, projecting organic net sales to range from a 1% decline to a 1% increase [5] - The company forecasts adjusted operating profit and adjusted diluted earnings per share to fall 10% to 15% in constant currency [5]

Financial Performance - In Q2 fiscal 2026, net sales decreased by 7% to $4,860.8 million, with organic net sales down by 1% compared to the same period last year [105]. - Operating profit fell by 32% to $728 million, with an operating profit margin of 15.0%, a decrease of 560 basis points [105]. - Adjusted diluted earnings per share decreased by 21% on a constant-currency basis to $1.10 [105]. - For the six-month period ended November 23, 2025, net sales decreased by 7% to $9,378.3 million, with organic net sales down by 2% [121]. - Operating profit for the six-month period increased by 29% to $2,453.8 million, with an operating profit margin of 26.2%, an increase of 730 basis points [121]. - The company reported an adjusted operating profit of $847.7 million for the quarter ended November 23, 2025, representing a 20% decrease compared to $1,064.0 million in the same quarter of the previous year [200]. - The diluted earnings per share (EPS) for the quarter was $0.78, a 45% decline from $1.42 in the prior year quarter [205]. - The adjusted diluted EPS for the six-month period was $1.96, a 21% decrease from $2.47 in the same period of the previous year [205]. Costs and Expenses - Restructuring, transformation, impairment, and other exit costs totaled $122 million in Q2 fiscal 2026, significantly higher than $1 million in the same period last year [112]. - SG&A expenses decreased by $20 million to $1,688 million, with SG&A as a percentage of net sales increasing by 110 basis points [128]. - Restructuring and transformation costs totaled $138 million, significantly up from $3 million in the same period last year [130]. - Unallocated corporate expense totaled $88 million in the second quarter of fiscal 2026, an increase from $65 million in the same period in fiscal 2025 [168]. - The company recorded a $53 million non-cash impairment charge related to the Uncle Toby's brand intangible asset due to lower future sales projections [179]. - The company undertook restructuring and transformation charges amounting to $90.5 million for the six-month period ended Nov. 23, 2025 [211]. Taxation - The effective tax rate for Q2 fiscal 2026 was 23.3%, up from 20.1% in the same period last year [114]. - The effective tax rate increased to 24.9% for the six-month period ended November 23, 2025, compared to 20.9% in the same period last year [132]. - Adjusted effective income tax rate for the quarter ended Nov. 23, 2025, was 23.3%, consistent with the previous year [211]. - Enhanced income tax disclosures will be required starting from fiscal 2026, which may affect the company's reporting practices [185]. Divestitures and Acquisitions - Divestitures gain totaled $1,054 million, mainly from the sale of the United States yogurt business [129]. - The company experienced a divestiture gain of $1,054.4 million in fiscal 2026 related to the sale of its United States yogurt business [189]. - The combination of growth investments and input cost inflation is expected to outpace anticipated cost savings from Holistic Margin Management [104]. Segment Performance - North America Retail net sales decreased by 13% to $2,883.3 million for the six-month period ended November 23, 2025, driven by lower volume growth [138]. - International net sales increased by 6% to $728.9 million for the quarter ended November 23, 2025, supported by volume growth and favorable foreign currency impacts [146]. - North America Pet net sales increased by 11% to $660.4 million for the quarter ended November 23, 2025, driven by favorable net price realization and volume growth [153]. - Segment operating profit for North America Retail decreased by 22% to $1,246 million for the six-month period ended November 23, 2025 [145]. - North America Pet net sales increased by 8% in the six-month period ended November 23, 2025, compared to the same period in fiscal 2025, driven by favorable net price realization and contributions from volume growth, including the impact of the Acquisition [155]. - North America Pet organic net sales decreased by 2% in the six-month period ended November 23, 2025, primarily due to a decrease in contributions from organic volume growth [158]. - Segment operating profit for North America Pet decreased by 12% to $123 million in the second quarter of fiscal 2026, impacted by higher input costs and SG&A expenses [159]. - North America Foodservice net sales decreased by 8% in the second quarter of fiscal 2026, driven by a decrease in contributions from volume growth and unfavorable net price realization [162]. - The North America Pet segment operating profit decreased by 12% for the quarter ended Nov. 23, 2025, with no impact from foreign currency exchange [209]. - The North America Foodservice segment operating profit also declined by 12% for the quarter ended Nov. 23, 2025, with no impact from foreign currency exchange [209]. - The International segment operating profit showed a remarkable growth of 111% for the six-month period ended Nov. 23, 2025, with a 3-point positive impact from foreign currency [209]. Cash Flow - Cash provided by operations was $1,216 million during the six-month period ended November 23, 2025, a decrease of $559 million compared to the same period last year [170]. - Cash provided by investing activities was $1,539 million during the six-month period ended November 23, 2025, primarily due to the sale of the United States yogurt business for $1,798 million [171]. - Cash used by financing activities was $2,434 million during the six-month period ended November 23, 2025, including $1,240 million of net debt payments [172]. Risk Management - The estimated maximum potential value-at-risk for interest rate instruments was $38 million as of Nov. 23, 2025, reflecting a decrease in interest rate volatility [233]. - The value-at-risk for foreign currency instruments was $50 million, showing an immaterial change of $1 million [233]. - The value-at-risk for commodity instruments was $2 million, with an immaterial decrease of $1 million [233]. - The value-at-risk for equity instruments was $3 million, with no significant change reported [233]. - The company identified risk factors in its Annual Report that could affect future results, with no obligation to revise forward-looking statements [232]. Internal Controls and Reporting - A new consolidation and financial reporting system was finalized, tested, and implemented during the second quarter of fiscal 2026 [235]. - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of November 23, 2025 [234]. - The company has made changes to its internal control over financial reporting that may materially affect its operations [235]. - The company is analyzing the impact of recently issued accounting standards updates on its financial position and results of operations [182].

Core Insights - General Mills reported earnings per share of $1.10, exceeding the estimated $1.02, and revenue of approximately $4.86 billion, surpassing the estimated $4.78 billion [1][5] - The company has faced challenges, including a decline in second-quarter profit and sales, but implemented price cuts to attract consumers affected by inflation, which boosted sales [2][5] - General Mills reaffirmed its full-year outlook, demonstrating confidence in its strategic direction despite a volatile environment [3][5] Financial Metrics - The company has a price-to-earnings (P/E) ratio of approximately 10.15, indicating the market's valuation of its earnings [4] - The price-to-sales ratio is about 1.38, and the enterprise value to sales ratio is around 2.07, reflecting the company's valuation compared to its sales [4] - The debt-to-equity ratio is approximately 1.47, highlighting its use of debt financing relative to equity [4]

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Core Insights - General Mills reported revenue of $4.86 billion for the quarter ended November 2025, reflecting a year-over-year decline of 7.2% and an EPS of $1.10, down from $1.40 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $4.77 billion by 1.89%, while the EPS surpassed the consensus estimate of $1.02 by 7.84% [1] Financial Performance Metrics - North America Foodservice net sales were $581.8 million, below the average estimate of $589.13 million, marking a year-over-year decline of 7.7% [4] - International net sales reached $728.9 million, exceeding the estimated $710.94 million, with a year-over-year increase of 5.6% [4] - North America Pet net sales were $660.4 million, surpassing the average estimate of $649.02 million, showing a year-over-year growth of 10.8% [4] - North America Retail net sales totaled $2.88 billion, slightly above the estimated $2.83 billion, but represented a significant year-over-year decline of 13.2% [4] Operating Profit Analysis - North America Retail operating profit was $682.3 million, exceeding the average estimate of $650.78 million [4] - International operating profit was reported at $28.4 million, higher than the estimated $19.06 million [4] - North America Pet operating profit was $123.1 million, slightly below the average estimate of $125.48 million [4] - North America Foodservice operating profit was $104.8 million, compared to the average estimate of $112.21 million [4] Stock Performance - General Mills shares have returned -1.4% over the past month, while the Zacks S&P 500 composite increased by 1% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - The company reported improvement in organic sales and Holistic Margin Management, with a focus on transformation initiatives [4][5] - Pricing adjustments have been effective, with over 90% of pricing actions performing as expected [5][19] - The company anticipates profit growth in the fourth quarter, aided by favorable trade timing and the 53rd week [9][61] Business Line Data and Key Metrics Changes - North America Retail has shown growth in volume share across eight of the top ten categories, with a focus on the Remarkability Framework [6][14] - The North America Pet segment has gained share in core products, with the Life Protection Formula performing well [6][8] - The Love Made Fresh initiative has reached approximately 5% market share among early customers, with strong consumer ratings [7][8] Market Data and Key Metrics Changes - The pet category overall grew about 1% in Q2, with dog feeding lagging behind due to shifts in consumer behavior [32] - The cereal category remains under pressure, with a decline of about 3%, but there are signs of improvement in specific products like Cheerios [70] Company Strategy and Development Direction - The company aims to maintain momentum in organic sales and profitability through strategic pricing and product innovation [4][9] - There is a focus on enhancing the Remarkability Framework across all business lines to drive growth [30][39] - The company is monitoring competitive pricing strategies and believes it is well-positioned against competitors [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the second half of the fiscal year, expecting continued improvement in sales and profitability [28][29] - The operating environment remains volatile, with potential impacts from government actions and consumer sentiment [66] - Management is confident in the ability to deliver transformation savings and maintain competitive pricing [76] Other Important Information - The company has completed pricing adjustments on two-thirds of its portfolio, with positive responses in most categories [74] - There is ongoing work to improve the performance of the Wilderness brand, with new product launches planned [78] Q&A Session Summary Question: Sustainability of volume growth in North America Retail - Management acknowledged some shipment timing benefits but remains optimistic about continued category improvement [12][14] Question: Competitive environment and pricing strategies - Management noted that discounting levels have remained stable and emphasized the importance of effective execution in pricing [16][18] Question: Expectations for fiscal 3Q and 4Q - Management expects improvements in price mix and volume growth, but cautioned about potential volatility [25][29] Question: Impact of Love Made Fresh on base business - Management indicated it is too early to assess the impact of Love Made Fresh on the core business [58][60] Question: Inflation and cost of goods sold outlook - Management reaffirmed guidance for base inflation around 3% and noted minimal tariff impacts [51][52] Question: Performance of the pet category - Management reported that the dog feeding segment is lagging, but long-term growth is expected due to trends in humanization [32][33] Question: Effectiveness of pricing investments - Management reported a high success rate in pricing adjustments, with ongoing monitoring of performance [74][76] Question: Channel shifts in pet purchases - E-commerce is identified as a growing channel for pet purchases, reflecting consumer behavior changes [90]