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General Mills (NYSE:GIS) just dropped its Q2 numbers, and they're impressive$5.24 billion in revenue, up 2% year-over-year, and $1.40 adjusted EPS, crushing expectations. Operating profit surged 33%, thanks to higher margins and strong volume growth. Even the North America Pet segment clawed its way back to growth. But here's the twist: the snack and cereal heavyweight has taken a cautious stance, slashing its fiscal 2025 profit outlook. The stock tanked 4% Wednesday as investors digested the news.
So, what's spooking the market? General Mills is now projecting a 3% to 1% drop in adjusted EPS for 2025, alongside a 2% to 4% decline in operating profit. Why? The company's throwing cash into promotions and growth investments, betting big on long-term market share gains. Retail inventory build-ups padded Q2 results, but those will reverse in the back half of the year, tempering the sugar rush. CEO Jeff Harmening is optimistic about the company's strategic moves but admits the road ahead is costly. Full-year organic sales growth is now expected at the low end of its flat-to-1% range.
Still, analysts like Stifel are sticking with a Buy rating, keeping their $82 price target intact. With a 25% return on equity and a 3.64% dividend yield, General Mills remains a steady hand in choppy waters. But the lowered guidance has clearly raised some eyebrows. For now, this is a classic tug-of-war: strong fundamentals versus near-term headwinds. Investors might want to keep this cereal box on their radar, but don't pour the milk just yet.
This article first appeared on GuruFocus.