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Conagra (CAG) Pulls Up Guidance on Q2 Earnings & Sales Beat
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Conagra Brands, Inc. (CAG - Free Report) delivered splendid second-quarter fiscal 2023 results, with the top and the bottom line increasing year over year and outdid the Zacks Consensus Estimate.
Results reflect strength in the company’s brands and ongoing execution of the Conagra Way playbook. The company delivered improved service levels and productivity, which along with its efforts to combat inflation, helped it sail through the inflationary pressures and industry-wide supply chain hurdles. Every segment registered growth in the adjusted operating margin. Management raised its overall fiscal 2023 guidance based on a robust first-half show and sustained business momentum.
Quarter in Detail
Conagra’s quarterly adjusted earnings per share (EPS) came in at 81 cents, beating the Zacks Consensus Estimate and our estimate of 66 cents. The bottom line increased 38.6% year over year. This can be attributed to the solid gross profit and impressive performance of CAG’s Ardent Mills joint venture.
Conagra generated net sales of $3,312.9 million, which advanced 8.3% year over year. The figure surpassed the Zacks Consensus Estimate of $3,269 million and our estimate of $3,219.3 million. The year-over-year sales increase resulted from higher organic sales, partly negated by currency headwinds (to the tune of 0.3%).
Organic net sales rose 8.6% due to a price/mix, increasing 17%. The price/mix was backed by the company’s inflation-induced pricing actions. The upside was somewhat negated by volumes that dropped 8.4%, affected by the elasticity effect stemming from pricing actions.
The adjusted gross margin expanded 310 basis points to 28.2%. Adjusted SG&A expenses, excluding advertising and promotional (A&P) costs, increased 17.5% to $291 million due to higher incentive compensation. A&P costs came in at $79 million, up 10.3% from the year-ago quarter’s level.
Adjusted EBITDA (including equity method investment earnings and the pension and post-retirement non-service income) rose 21.5% to $710 million, mainly led by higher adjusted gross profit and solid performance from its Ardent Mills joint venture. This was partly offset by reduced pension income.
Segment Details
Grocery & Snacks: Quarterly net sales in the segment came in at $1,349.9 million, up 6.8% year over year. Organic net sales also rose 6.8%, with the price/mix up 18.4%, fueled by positive inflation-driven pricing. Volumes declined 11.6% due to the elasticity impact of inflation-driven pricing actions. During the quarter, CAG saw share gains in snacking categories like meat snacks and microwave popcorn as well as staples categories, namely refried beans and canned meat.
Refrigerated & Frozen: Net sales grew 10.5% to $1,421.5 million. Organic sales also rose 10.5% on a price/mix increase of 16%. However, volumes were down 5.5% due to the elasticity impacts of pricing. The company saw an improved share in frozen single-serve meals, plant-based protein and frozen breakfast.
International: Net sales declined 1.3% to $259 million, reflecting improved organic net sales. However, the adverse impacts of foreign currency translations were a downside. Organic sales rose 2.1%, with the price/mix up 12.8% and volumes down 10.7%. Volumes were hurt by the elasticity effect from inflation-led pricing.
Foodservice: Sales advanced 14.8% (also organically) to $283 million. Price/mix improved 18.2% on favorable inflation-driven pricing. Volume declined 3.4%, mainly due to the elasticity impact of inflation-driven pricing actions.
Other Updates
The company exited the quarter with cash and cash equivalents of $39.7 million, senior long-term debt, excluding current installments, of $8,081.8 million and total stockholders’ equity of $8,737.7 million. During the quarter, Conagra paid out a quarterly dividend of 33 cents per share.
Guidance
Based on a solid first-half performance, Conagra is pulling up its guidance for fiscal 2023. That said, it continues to anticipate supply-chain hurdles associated with the dynamic landscape. Gross inflation (input cost inflation before hedging and other sourcing gains) is anticipated to moderate through the remaining part of fiscal 2023. Also, performance from the company’s Ardent Mills joint venture is likely to moderate.
For fiscal 2023, organic net sales are anticipated to rise 7-8%, up from the prior view of 4-5% growth. The adjusted operating margin is anticipated to be 15.3-15.6%, up from around 15% projected earlier.
Management now envisions adjusted EPS of $2.60-$2.70, suggesting 10-14% year-over-year growth. The adjusted EPS growth was earlier envisioned at 1-5%.
For fiscal 2023, capital expenditures are likely to be about $425 million, interest expenses are expected at roughly $405 million and the effective tax rate is anticipated at around 24%. Management expects the pension income to be nearly $25 million.
Shares of the Zacks Rank #2 (Buy) company have risen 11.1% in the past six months compared with the industry’s growth of 5.6%.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.3% and 4.6%, respectively, from the corresponding year-ago reported figures.
Ingredion, which produces and sells starches and sweeteners, currently carries a Zacks Rank #2. Ingredion’s shares have surged 21.5% in the past three months.
The Zacks Consensus Estimate for INGR’s current financial-year earnings per share suggests an increase of 5.9% from the year-ago reported number.
Nomad Foods, a frozen food products company, currently carries a Zacks Rank #2. NOMD has a trailing four-quarter earnings surprise of 11.5%, on average.
Nomad Foods’ shares have increased almost 27% in the past three months.
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Conagra (CAG) Pulls Up Guidance on Q2 Earnings & Sales Beat
Conagra Brands, Inc. (CAG - Free Report) delivered splendid second-quarter fiscal 2023 results, with the top and the bottom line increasing year over year and outdid the Zacks Consensus Estimate.
Results reflect strength in the company’s brands and ongoing execution of the Conagra Way playbook. The company delivered improved service levels and productivity, which along with its efforts to combat inflation, helped it sail through the inflationary pressures and industry-wide supply chain hurdles. Every segment registered growth in the adjusted operating margin. Management raised its overall fiscal 2023 guidance based on a robust first-half show and sustained business momentum.
Quarter in Detail
Conagra’s quarterly adjusted earnings per share (EPS) came in at 81 cents, beating the Zacks Consensus Estimate and our estimate of 66 cents. The bottom line increased 38.6% year over year. This can be attributed to the solid gross profit and impressive performance of CAG’s Ardent Mills joint venture.
Conagra Brands Price, Consensus and EPS Surprise
Conagra Brands price-consensus-eps-surprise-chart | Conagra Brands Quote
Conagra generated net sales of $3,312.9 million, which advanced 8.3% year over year. The figure surpassed the Zacks Consensus Estimate of $3,269 million and our estimate of $3,219.3 million. The year-over-year sales increase resulted from higher organic sales, partly negated by currency headwinds (to the tune of 0.3%).
Organic net sales rose 8.6% due to a price/mix, increasing 17%. The price/mix was backed by the company’s inflation-induced pricing actions. The upside was somewhat negated by volumes that dropped 8.4%, affected by the elasticity effect stemming from pricing actions.
The adjusted gross margin expanded 310 basis points to 28.2%. Adjusted SG&A expenses, excluding advertising and promotional (A&P) costs, increased 17.5% to $291 million due to higher incentive compensation. A&P costs came in at $79 million, up 10.3% from the year-ago quarter’s level.
Adjusted EBITDA (including equity method investment earnings and the pension and post-retirement non-service income) rose 21.5% to $710 million, mainly led by higher adjusted gross profit and solid performance from its Ardent Mills joint venture. This was partly offset by reduced pension income.
Segment Details
Grocery & Snacks: Quarterly net sales in the segment came in at $1,349.9 million, up 6.8% year over year. Organic net sales also rose 6.8%, with the price/mix up 18.4%, fueled by positive inflation-driven pricing. Volumes declined 11.6% due to the elasticity impact of inflation-driven pricing actions. During the quarter, CAG saw share gains in snacking categories like meat snacks and microwave popcorn as well as staples categories, namely refried beans and canned meat.
Refrigerated & Frozen: Net sales grew 10.5% to $1,421.5 million. Organic sales also rose 10.5% on a price/mix increase of 16%. However, volumes were down 5.5% due to the elasticity impacts of pricing. The company saw an improved share in frozen single-serve meals, plant-based protein and frozen breakfast.
International: Net sales declined 1.3% to $259 million, reflecting improved organic net sales. However, the adverse impacts of foreign currency translations were a downside. Organic sales rose 2.1%, with the price/mix up 12.8% and volumes down 10.7%. Volumes were hurt by the elasticity effect from inflation-led pricing.
Foodservice: Sales advanced 14.8% (also organically) to $283 million. Price/mix improved 18.2% on favorable inflation-driven pricing. Volume declined 3.4%, mainly due to the elasticity impact of inflation-driven pricing actions.
Other Updates
The company exited the quarter with cash and cash equivalents of $39.7 million, senior long-term debt, excluding current installments, of $8,081.8 million and total stockholders’ equity of $8,737.7 million. During the quarter, Conagra paid out a quarterly dividend of 33 cents per share.
Guidance
Based on a solid first-half performance, Conagra is pulling up its guidance for fiscal 2023. That said, it continues to anticipate supply-chain hurdles associated with the dynamic landscape. Gross inflation (input cost inflation before hedging and other sourcing gains) is anticipated to moderate through the remaining part of fiscal 2023. Also, performance from the company’s Ardent Mills joint venture is likely to moderate.
For fiscal 2023, organic net sales are anticipated to rise 7-8%, up from the prior view of 4-5% growth. The adjusted operating margin is anticipated to be 15.3-15.6%, up from around 15% projected earlier.
Management now envisions adjusted EPS of $2.60-$2.70, suggesting 10-14% year-over-year growth. The adjusted EPS growth was earlier envisioned at 1-5%.
For fiscal 2023, capital expenditures are likely to be about $425 million, interest expenses are expected at roughly $405 million and the effective tax rate is anticipated at around 24%. Management expects the pension income to be nearly $25 million.
Shares of the Zacks Rank #2 (Buy) company have risen 11.1% in the past six months compared with the industry’s growth of 5.6%.
3 Other Food Stocks to Grab
Some other well-ranked stocks are Campbell Soup (CPB - Free Report) , Ingredion Incorporated (INGR - Free Report) and Nomad Foods (NOMD - Free Report) .
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.3% and 4.6%, respectively, from the corresponding year-ago reported figures.
Ingredion, which produces and sells starches and sweeteners, currently carries a Zacks Rank #2. Ingredion’s shares have surged 21.5% in the past three months.
The Zacks Consensus Estimate for INGR’s current financial-year earnings per share suggests an increase of 5.9% from the year-ago reported number.
Nomad Foods, a frozen food products company, currently carries a Zacks Rank #2. NOMD has a trailing four-quarter earnings surprise of 11.5%, on average.
Nomad Foods’ shares have increased almost 27% in the past three months.