General Mills, Inc. (NYSE:GIS) announces its fourth-quarter 2016 earnings June 28 before the market opens. The maker of Cheerios and other packaged foods is expected to deliver lower revenues and higher earnings in fiscal 2017.

General Mills has literally been shrinking in recent years in terms of its top-line revenue, which analysts estimate will decline 6% to $15.6 billion, the third consecutive year doing so.

In fact, General Mills’ revenue will be only marginally higher than the annual sales it generated in fiscal 2010, the company’s most profitable year of the past decade.

As a result of the company’s inability to organically grow its business, GIS stock has taken a beating in 2017, down 9% year to date.

That’s the bad news.

The good news is that this year’s so-far negative return is the first for GIS stock over the past decade. Despite its top-line woes, it has managed to fill its role as a defensive stock almost flawlessly.

If you’re looking for hyper-growth, both regarding its stock price and its top- and bottom-lines, I’m afraid you’re going to be deeply disappointed.

Things to Look For in GIS Earnings

It has been some time since I’ve considered General Mills’ stock. The last occasion being all the way back to November 2011 when I compared GIS stock with Kellogg Company (NYSE:K).

I recommended Kellogg’s stock over General Mills. It has been a dead heat between the two companies since then, both up over 40% over the past five-and-a-half years.

Today, not much has changed to separate the two businesses.

They have similar dividend yields and are valued about the same when it comes to price-to-sales and other standard metrics. The only real difference is that General Mills’ long-term debt is 33.1% of its $21.7 billion in total assets compared to Kellogg whose LTD is 43.5% of total assets, but even that’s not a significant difference.

So, I’d look for a couple of things from GIS earnings.

Free Cash Flow Growth

In its February Consumer Analyst Group of New York (CAGNY) presentation, GIS points out that on a three-year rolling basis, it increased free cash flow in the years 2014-2016 by 36.6% over 2010-2012.

To keep the ball rolling in the right direction, FCF will have to be $1.87 billion or higher in fiscal 2017. Given that its operating cash flow through the first nine months of fiscal 2017 was down 16.3%, it’s going to take a miracle to keep the streak alive.

If by chance it does hit $1.87 billion, that’s an excellent sign that cash flow generation is still very much intact despite shrinking revenue.

Higher Margins

It expects organic net sales to decline 4% in fiscal 2017, so any improvements it can make on the bottom line will be helpful to GIS stock.

In its Q3 2017 press release, it projected that its adjusted operating margin would be at least 18% in fiscal 2017, 120 basis points higher than in fiscal 2016.

Anything below 18% would be a definite negative given slipping revenues.

Bottom Line on General Mills Stock

It likely won’t happen, but it would be nice if General Mills would provide some details how 301 Inc., its venture capital arm launched in October 2015, is faring.

After all, if General Mills wants to deliver revenue growth of the organic kind, it has got to do a better job developing products consumers want to buy.

At the end of the day, I don’t expect a lot of fireworks from General Mills’ earnings report.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.