GIS - General Mills stock moves up on earnings beat dividend boost

General Mills ( NYSE: GIS ) jumped to a healthy earnings beat on Wednesday.

For its fiscal fourth quarter, the manufacturer of Cheerios, Chex, and more reported non-GAAP EPS of $1.12, well above the  $1.01 consensus and net sales of $4.89B, an 8.1% gain from the year prior that edged estimates by about $80M.

However, adjusted gross margin was down 70 basis points to 33.8% of net sales in the quarter “driven by double-digit input cost inflation, higher other cost of goods sold, and supply chain deleverage.”  For the full year gone-by, adjusted gross margin was down 180 basis points due to the same factors.

However, management indicated it is taking steps to offset inflation via price increases and “Holistic Margin Management” program.

"Though significant inflation and supply chain disruptions put pressure on our margins, we responded quickly to address those challenges and keep our brands on shelf for our customers and consumers,” CEO Jeff Harmening said.

Moving forward, organic net sales are expected to increase 4 to 5% while adjusted operating profit falls between 1% and 2% in constant currency.  Adjusted diluted EPS are expected to range between flat and up 3 percent, with headwinds to come from divestitures. The release faults the portfolio reshaping for an approximately 3% reduction in net sales and a 1% cut to adjusted diluted EPS growth.

Yet, the divestitures were also cited as key factors allowing financial flexibility to raise the dividend and aggressively repurchase shares, per Harmening.

"We plan to build on our strong momentum in fiscal 2023 by continuing to compete effectively, investing in our brands and capabilities, and reshaping our portfolio,” he said. “Importantly, our board reinforced its confidence in our performance and outlook by approving a six percent increase in our dividend, underlining our commitment to driving strong returns for General Mills shareholders over the long term."

Shares gained just over 1% in premarket trading on Wednesday.

Read more on recent divestitures .

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