EPS of $1.42 increased by 38.8% from previous year
Gross margin of 36.9%
Net income of 795.70M
"Entering fiscal 2025, our top priority was to accelerate our organic net sales growth, and specifically our volume growth, by delivering remarkable experiences to consumers across our leading food brands." - Jeff Harmening
General Mills Inc (GIS) QQ2 2025 Earnings Analysis: Organic Growth Acceleration, Margin Resilience via HMM Savings, and Strategic Reinvestments in a Challenging Macro Environment
Executive Summary
General Mills (GIS) reported a modest organic top-line gain in Q2 2025, with organic net sales up 1% and adjusted operating profit increasing 7% in constant currency, accompanied by a 12% rise in adjusted diluted EPS in constant currency. The quarterly outturn was aided by timing-related items that boosted net sales by ~1.5 percentage points and operating profit/EPS by ~6 percentage points, all of which are expected to reverse in the second half. Management also highlighted ongoing investments to accelerate volume and share growth across its leading brands, supported by robust HMM (high multiple cost) savings aimed at offsetting inflation and funding brand reinvestment.
Looking forward, the company reaffirmed its organic net sales guidance for fiscal 2025 at flat to up 1%, but lowered the midpoint for adjusted operating profit and adjusted EPS growth to reflect incremental branding and promotional investments. GIS continues to target at least 95% free cash flow conversion and remains focused on capital allocation through buybacks, dividends, and selective M&A as part of its portfolio reshaping plan. Notably, North America Pet returned to growth and share momentum improved in several core categories, while Refrigerated Dough remains a key area of execution risk that the company plans to address with price/value actions, product renovations, and stepped-up media support. The near-term margin profile will reflect the timing reversal, higher investments to support volume, and a partial reset of incentive compensation, with the full-year guidance implying an ~8% decline in adjusted operating profit in constant currency in the second half, offset by continued HMM savings and volume-driven upside in select franchises.
Overall, GIS presents a disciplined cash-generating profile with a diversified product portfolio, meaningful cost savings, and a clear plan to accelerate organic growth while managing near-term margin pressures. The stock hinges on execution of the refrigerated dough turnaround, continued share gains in pet and cereal, and the successful closing of strategic acquisitions (Whitebridge Pet Brands) and divestitures (North American Yogurt) that will recalibrate the mix and growth trajectory going into fiscal 2026 and beyond.
Key Performance Indicators
Revenue
5.24B
QoQ: 8.09% | YoY:1.96%
Gross Profit
1.93B
36.85% margin
QoQ: 14.35% | YoY:9.36%
Operating Income
1.08B
QoQ: 29.63% | YoY:32.78%
Net Income
795.70M
QoQ: 37.21% | YoY:33.62%
EPS
1.43
QoQ: 38.83% | YoY:38.83%
Revenue Trend
Margin Analysis
Key Insights
Revenue (net sales): $5.240B, up 2% reported; organic net sales up 1% YoY, up 1% QoQ. YoY and QoQ figures aligned with the company’s reported organic growth framework.
Gross margin (adjusted): 36.3% (+130 bps YoY), driven by HMM cost savings offsetting input cost inflation and price/mix effects.
Adjusted operating margin: 20.3% (+100 bps YoY), aided by higher gross margin and HMM savings; timing benefits contributed roughly 100 bps to margin in Q2 but are expected to reverse largely in Q3.
Operating profit: $1.098B (adjusted), up 7% in constant currency.
Net income: $795.7M; net income margin 15.18% (GAAP level in line with reported items; adjusted metrics show stronger margin dynamics).
Financial Highlights
Overview of core Q2 2025 metrics and directional trends:
- Revenue (net sales): $5.240B, up 2% reported; organic net sales up 1% YoY, up 1% QoQ. YoY and QoQ figures aligned with the company’s reported organic growth framework.
- Gross margin (adjusted): 36.3% (+130 bps YoY), driven by HMM cost savings offsetting input cost inflation and price/mix effects.
- Adjusted operating margin: 20.3% (+100 bps YoY), aided by higher gross margin and HMM savings; timing benefits contributed roughly 100 bps to margin in Q2 but are expected to reverse largely in Q3.
- Operating profit: $1.098B (adjusted), up 7% in constant currency.
- Net income: $795.7M; net income margin 15.18% (GAAP level in line with reported items; adjusted metrics show stronger margin dynamics).
- Diluted EPS: $1.40 (adjusted $1.40 in the quarter; diluted $1.42 per the notes); up 12% in constant currency.
- Cash flow: Operating cash flow of $1.150B in Q2; 1H operating cash flow $1.80B (+19% YoY); free cash flow (F CF) for the period: $989.6M in fiscal 2025 first half; FCF conversion guidance remains at least 95% of adjusted after-tax earnings for the year.
- Net debt and liquidity: Cash and cash equivalents at period-end $2.293B; total debt $14.522B; net debt $12.228B; robust cash generation supports ongoing buybacks and dividends.
- Dividends and capital allocation: Net share repurchases and dividends contributed meaningfully to cash deployment in the period; total cash returned to shareholders in 1H 2025 was $1.2B.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
5.24B
1.96%
8.09%
Gross Profit
1.93B
9.36%
14.35%
Operating Income
1.08B
32.78%
29.63%
Net Income
795.70M
33.62%
37.21%
EPS
1.43
38.83%
38.83%
Key Financial Ratios
currentRatio
0.92
grossProfitMargin
36.9%
operatingProfitMargin
20.6%
netProfitMargin
15.2%
returnOnAssets
2.38%
returnOnEquity
8.65%
debtEquityRatio
1.58
operatingCashFlowPerShare
$2.07
freeCashFlowPerShare
$1.78
dividendPayoutRatio
42.5%
priceToBookRatio
3.97
priceEarningsRatio
11.47
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key takeaways from the management call, organized by theme:
- Strategy and growth priorities: “Entering fiscal 2025, our top priority was to accelerate our organic net sales growth, and specifically our volume growth, by delivering remarkable experiences to consumers across our leading food brands.” This underscores GIS’s commitment to volume-led growth and brand-led value creation, even as the company steps up investments to support long-term brand health.
- Share gains and competitive position: Management highlighted broad-based share gains across segments, noting “56% of our priority businesses growing or holding pound share and 38% growing or holding dollar share” in Q2, with U.S. pet food returning to pound-share growth and cereal campaigns driving stronger dollar-share performance.
- Reinvestments and margin dynamics: The team stressed higher promotional investment to support volume and market share, with “HMM cost savings to offset inflation and reinvest back into our brands” and a revised annual outlook implying a lower profit trajectory in 2H due to incremental investments and a partial incentive compensation reset.
- Operational tactics for refrigerated dough: In response to weaker trends in Refrigerated Dough, GIS outlined concrete actions, including price/value actions, 30% flavor and format renovations (e.g., “more cinnamon” and “more flaky layers” campaigns), and a stepped-up media plan—“media investment to be up more than 40% on our canned dough line in Q3.”
- Pet acquisition and portfolio breadth: The Whitebridge Pet Brands deal and the Tiki Cat opportunity were presented as strategic catalysts for pet category growth in North America, with Tiki Cat displaying >20% annual retail growth and room for incremental household penetration.
- Guidance and outlook: Management reaffirmed the organic net sales target (flat to up 1%), but anticipated lower midpoints for adjusted operating profit and adjusted EPS growth, reflecting the investment pace, while maintaining a disciplined stance on cash generation and deleveraging.
Entering fiscal 2025, our top priority was to accelerate our organic net sales growth, and specifically our volume growth, by delivering remarkable experiences to consumers across our leading food brands.
— Jeff Harmening
We reaffirmed our organic net sales guidance, with our current expectations toward the lower end of the range.
— Kofi Bruce
Forward Guidance
Forward-looking commentary and assumptions from GIS management are as follows:
- Organic net sales: expected to be flat to up 1% for fiscal 2025, with the midpoint at the lower end of that range.
- Margin and profitability: adjusted operating profit is now projected to be down 4% to down 2% in constant currency for fiscal 2025; adjusted diluted EPS is expected to be down 3% to down 1% in constant currency. These views incorporate higher promotional investments to drive volume, offset by continued HMM-driven cost savings (full-year HMM savings now targeted at 5% of COGS) and axiomatically offset inflation of roughly 4% of COGS.
- Free cash flow: GIS continues to target at least 95% free cash flow conversion of adjusted after-tax earnings for 2025, reflecting strong working capital management and cash-generating capabilities.
- Timing items and second-half trajectory: The company noted a reversal of timing-related benefits in the second half (roughly 3-point headwind to EPS and 3-point to operating profit from timing items), while incremental investments are expected to continue into 2H to support share gains across key brands.
- Exclusions: The outlook does not include the impact of North American Yogurt divestitures or the Whitebridge Pet Brands acquisition, as those transactions have not closed yet; subsequent M&A activity remains a potential driver of future growth and portfolio optimization.
- Key catalysts: sustained volume growth in core platforms (cereal, pet, and snacks), improved share trends in North America Retail, and the successful integration and monetization of strategic acquisitions (Whitebridge Pet Brands) are pivotal for the 2026 growth trajectory.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
GIS Focus
36.85%
20.60%
8.65%
11.47%
CPB
30.50%
12.20%
4.42%
17.22%
KHC
35.40%
8.06%
0.21%
95.71%
CAG
26.50%
12.60%
3.23%
11.53%
HRL
17.40%
8.74%
2.40%
25.63%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
GIS remains a high-quality consumer staples franchise with a strong brand suite, durable cash flows, and a proactive cost-reduction program (HMM) that funds reinvestment without compromising liquidity. The Q2 2025 results demonstrate solid organic growth and margin resilience, albeit with near-term profitability tempered by intentional investments to accelerate volume and market share gains. The updated guidance implies a modest 2H earnings trajectory, largely driven by timing reversals and ongoing promotional activity, but the company’s cash conversion expectations (≥95%) and robust FCF provide ample runway for deleveraging and shareholder-friendly actions. Critical factors investors should monitor include: (1) the execution and margin impact of the refrigerated dough turnarounds, (2) the pace and profitability of Whitebridge Pet Brands integration, (3) China market recovery and Häagen-Dazs performance in distributor channels, and (4) the sustainability of share gains in North America Pet, cereal, and foodservice. Relative to peers, GIS offers a balanced mix of steady cash flow, moderate growth potential, and scope for multiple expansion if it can sustain volume growth and maintain cost discipline amid inflationary pressures.
Key Investment Factors
Growth Potential
– Pet category expansion via Whitebridge acquisition and Tiki Cat opportunity offers substantial long-term growth runway, leveraging premium wet cat food strengths and penetration in North America. – Ongoing HMM-driven cost savings (5% of COGS) provide a critical buffer to inflation while funding brand investment, promotional activity, and R&D for product renovations, supporting volume growth in high-potential categories (cereal, pet, and snacks). – Geographic and channel expansion, including expanded distribution in China via retail, foodservice, and e-commerce, together with non-measured channels growth, can contribute to mid-term margin expansion and sustainable revenue growth.
Profitability Risk
– Near-term margin headwinds from higher promotional spending and partial reversal of timing benefits in 2H; sensitivity to input cost inflation and price/mix dynamics could pressure profitability if inflation accelerates. – China macro headwinds impacting Häagen-Dazs traffic and discretionary consumer demand; geographic mix exposure remains a risk if growth opportunities in select international markets do not materialize. – Execution risk around refrigerated dough turnaround, including successful price/value realization and media support, and the integration of Whitebridge Pet Brands post-close.
Financial Position
– Strong operating cash flow generation (1H OCF $1.80B) supports 95%+ FCF conversion target and robust capital allocation including buybacks and dividends. – Leverage remains elevated (total debt ~$14.52B; net debt ~$12.23B) but cash generation supports deleveraging plans and potential bolt-on acquisitions. – Substantial asset base (goodwill and intangibles) reflects a diversified portfolio and brand equity; ongoing impairment risk is mitigated by cash flow resilience and strategic divestitures/growth investments.
SWOT Analysis
Strengths
Broad brand portfolio with leading positions in cereals, pet foods (Blue Buffalo), and snacks across diversified channels.
Consistent cash generation and strong balance-sheet resilience, enabling disciplined capital allocation and strategic M&A.
Material HMM cost savings (targeting 5% of COGS) that offset commodity inflation and fund brand investments.
Recent share momentum improvements in North America Retail and North America Pet, including U.S. cereal and Life Protection Formula dog food performance.
Weaknesses
Near-term pressure from Refrigerated Dough momentum, requiring aggressive value messaging and product renovations to restore share growth.
China headwinds impacting Häagen-Dazs shop traffic and overall macro sensitivity in international markets.
Reliance on consumer spending and input-cost volatility, which can amplify margin fluctuations if cost saving and pricing actions misalign with demand.
Opportunities
Whitebridge Pet Brands acquisition and Tiki Cat expansion could unlock premium pet-food penetration and incremental household penetration.
Continued non-measured-channel growth and distribution expansion in international markets and e-commerce.
Product renovations and marketing campaigns (e.g., more cinnamon, more flaky layers) to rejuvenate Refrigerated Dough and other core SKUs.
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