During the September 18 episode of Mad Money, Jim Cramer pointed out General Mills, Inc.’s (NYSE:GIS) unusually high dividend yield, calling it a warning sign for the packaged-food maker, as he said:
General Mills reports, too. One thing I never thought I’d see was a 6.72% dividend yield for this very consistent company. But input costs, GLP-1s, [and] processed food are all taking their toll on the stock, which is how its yield gets so high. What a red flag. I can’t recommend it.
General Mills Faces Another Year of Lower Earnings
General Mills, Inc. reaffirmed its fiscal 2027 outlook on September 8, calling for organic net sales ranging from a 1.5% decline to 0.5% growth. Adjusted operating profit is expected to decline 8% to 13% in constant currency, while adjusted diluted EPS is forecast at $3 to $3.20. The company also expects free cash flow conversion of approximately 95% of adjusted after-tax earnings. That outlook follows a difficult fiscal 2026. The company reported fiscal 2026 net sales of $18.42 billion, down from $19.49 billion a year earlier, while adjusted operating profit fell 16% to $2.81 billion and adjusted diluted EPS declined 16% to $3.55.
CEO Jeff Harmening offered a more constructive view on September 8, saying General Mills was seeing “improving retail sales trends and positive consumer response to our innovation efforts,” while adding, “we still have important work to do.”
Bear Case Rests on Volume and Margin Pressure
The fiscal 2026 results show the pressure extends beyond input costs. Organic volume declined 1 percentage point, organic price realization and mix declined 1 percentage point, and adjusted operating margin fell 190 basis points to 15.3%. General Mills, Inc. said higher input costs and lower contributions from volume growth were the primary drivers of the decline in adjusted operating profit.
The fiscal 2027 outlook leaves limited room for a rapid earnings recovery. At the midpoint, organic sales are expected to be roughly flat and adjusted operating profit is projected to decline about 10.5%. General Mills also identifies changes in consumer behavior, including weight-loss trends, among factors that could affect future demand.
Hedge Fund Ownership Edges Higher
According to Insider Monkey, which tracks more than 1,000 hedge funds, 46 hedge funds had stakes in General Mills in Q2, compared with 44 in Q1. Additionally, short interest was approximately 8.6% to 8.7% of the public float.
General Mills, Inc. is scheduled to report fiscal 2027 first-quarter results on September 23. Until then, the company’s latest guidance still calls for lower adjusted operating profit and EPS, even as management reports improving retail sales trends.
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