Conagra (CAG) Tops Q1 Earnings, Reaffirms FY18 EPS View

North American food company, Conagra Brands, Inc. CAG, reported better-than-expected first-quarter fiscal 2018 (ended August 2017) results.

Earnings

In the fiscal first quarter, Conagra’s quarterly earnings from continuing operations came in at 46 cents, higher than the Zacks Consensus Estimate of 41 cents. The bottom-line also surpassed the year-ago tally by 17.9%.  

Revenues

Conagra generated net revenue of $1,804.2 million in the reported quarter, higher than the Zacks Consensus Estimate of $1,787 million.

However, the top-line fell short of the year-ago total by 4.8%. Notably, organic sales during the reported quarter had dipped by 3%. The company claimed that increased slotting dues associated with innovation launches has hurt revenues during the quarter.

Conagra Brands Inc. Price, Consensus and EPS Surprise

 

ConAgra Foods Inc. Price, Consensus and EPS Surprise | ConAgra Foods Inc. Quote

Segment Details

Grocery & Snacks: The segment’s quarterly sales were $745.8 million, down 1.5% year over year.

Refrigerated & Frozen: Quarterly revenues were up 1.8% year over year to $615.7 million.

International: Sales of the segment came in at $190.9 million, down 2% year over year.

Foodservice: The segment’s quarterly revenues were $251.8 million, down 6.1% year over year.

Commercial: The company did not generate sales from this segment during the quarter. The segment used to include sales generated from the J.W. Swank and Spicetec Flavors & Seasonings businesses. Conagra divested both the businesses in July 2016.

Other Financial Fundamentals

Conagra’s cost of goods sold dropped 4.9% year over year to $1,285.2 million. Selling, general and administrative (SG&A) expenses increased 3.2% year over year to $239 million. Interest expenses plummeted 37.5% to $36.4 million due to lower debt levels.

Adjusted gross profit improved 20 basis points (bps) to 29.2% during the quarter.

Conagra exited the fiscal first quarter with cash and cash equivalents of $251.4 million, flat with respect to the value recorded at the end of fiscal 2016. Senior long-term debt (excluding current portion) was $2,571.1 million, down from $2,573.3 million as of May 28, 2017.

In the first three months of fiscal 2017, Conagra generated net cash of $136 million from its operating activities, down from $325.9 million recorded in the year-ago period. Capital spent on additions of property, plant and equipment totaled $42.6 million, down 26.7% year over year.

During the quarter, Conagra repurchased nearly 9 million common stock against $300 million.

Outlook

Conagra is poised to grow on the back of stronger innovation, ongoing volume strategy and increased sales. The company reaffirmed its earnings guidance range within 1.84-$1.89 per share for fiscal 2018. This Zacks Rank #3 (Hold) company plans to buyback roughly $1.1 billion worth shares of its common stock in fiscal 2018.

Stocks to Consider

Some better ranked stocks within the industry are listed below:

Associated British Foods PLC ASBFY presently carries a Zacks Rank #2 (Buy). The company’s earnings are expected to grow nearly 12% in the next three to five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ingredion Inc. INGR currently holds a Zacks Rank #2. The company’s earnings are expected to grow nearly 11% in the next three to five years.

Danone DANOY currently holds a Zacks Rank #2. The company’s earnings are expected to grow nearly 6.8% in the next three to five years.

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