Conagra Brands, Inc. ( CAG Quick Quote CAG - Free Report) has been focused on strengthening its frozen business. Keeping in line, the company unveiled the opening of a new state-of-the-art vegetable processing plant in Waseca, MN. This facility spans over 245,000 square feet and processes fresh vegetables to support the company’s frozen meals business and the Birds Eye brand. The Birds Eye brand delivered retail sales of more than $1.5 billion in fiscal 2021. The Waseca facility was established from the ground up, designed toward maximizing automation to generate higher efficiencies and improving food safety. This investment highlights Conagra’s confidence in its frozen business prospects. The company has long been focused on innovation across all areas, including the supply chain. The new facility will replace a 92-year-old facility in Waseca and offer nearly 20% more vegetable processing capacity. Annually, the facility can produce and process 120 million pounds of cut and cob corn, 45 million pounds of peas and more than 20 million pounds of rice. Also, the new facility apparently uses about 25% less water per pound of the product produced compared with CAG’s previous facility. We believe that a focus on enhancement and innovation is likely to work well for Conagra. What Else Is Working for Conagra?
Conagra has been benefiting from its efficient pricing initiatives, especially amid cost headwinds. In the third quarter of fiscal 2022, the price/mix improved by 8.6% and aided the organic sales growth of 6%. The favorable price/mix was backed by a positive brand mix and net pricing stemming from the company’s inflation-induced pricing actions. The price mix rose 8.8%, 8.4%, 8% and 8.4% in the Grocery & Snacks, Refrigerated & Frozen, International and Foodservice segments, respectively.
During the quarter, the top and bottom lines surpassed the Zacks Consensus Estimate and the former increased year over year. The company continued to benefit from solid consumer demand. A focus on innovation and prudent investments helped the company capture its share across the snack, frozen and staple categories. Management is focused on pricing and saving efforts to combat inflation, though gains from these are expected to be reflected in the first quarter of fiscal 2023. Management raised its organic net sales guidance for fiscal 2022 anticipating continued strength in consumer demand. Conagra earlier stated that it expects the consumer demand for its retail products to be more than historical levels in fiscal 2022 due to the new consumer habits cultivated amid the pandemic. Image Source: Zacks Investment Research
Considering trends to date (as of the last earnings call), which include better-than-anticipated consumer demand, lower-than-expected demand elasticities, increased planned pricing actions, management expects the organic net sales improvement to be greater than the earlier forecast. Organic net sales are now anticipated to rise more than 4%, up from the more than 3% growth expected before. For the fourth quarter, management anticipates organic sales growth of more than 7%.
Apart from this, Conagra is seeing recovery in its Foodservice business as restaurant traffic is picking up with pandemic-led curbs lifted and rising outdoor movement. In the third quarter of fiscal 2022, the Foodservice segment’s sales advanced 18.9% to $234.9 million due to an equal rise in organic sales. Volumes were up 10.5%, backed by the recovering restaurant traffic, partly negated by the elasticity impact of pricing actions. The price/mix increased 8.4% due to inflation-driven pricing actions and an improved product mix. With a continued rise in outdoor dining trends, the Foodservice business looks well-placed. Shares of this Zacks Rank #3 (Hold) company have risen 3.1% in the past three months against the industry’s 2.4% decline. 3 Solid Staple Stocks
Some better-ranked stocks are
Sysco Corporation ( SYY Quick Quote SYY - Free Report) , Pilgrim’s Pride ( PPC Quick Quote PPC - Free Report) and Campbell Soup ( CPB Quick Quote CPB - Free Report) . Sysco, which engages in marketing and distributing various food and related products, sports a Zacks Rank #1 (Strong Buy). Sysco has a trailing four-quarter earnings surprise of 9.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for SYY’s current financial-year sales and earnings per share (EPS) suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number. Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, carries a Zacks Rank #2 (Buy). Pilgrim’s Pride has a trailing four-quarter earnings surprise of 31.4%, on average. The Zacks Consensus Estimate for PPC’s current financial-year EPS suggests growth of almost 43% from the year-ago reported number. Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank #2. Campbell Soup has a trailing four-quarter earnings surprise of 10.8%, on average. The Zacks Consensus Estimate for CPB’s current financial-year sales suggests growth of 0.5% from the year-ago reported figure.