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Conagra Brands' (CAG) Pricing Efforts Bode Well Amid Cost Woes
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Conagra Brands, Inc. (CAG - Free Report) has been benefiting from strength in the frozen category. A focus on innovation has also been a key driver. Apart from this, robust pricing endeavors have been aiding the company amid cost headwinds.
Incidentally, the company’s second-quarter fiscal 2023 results reflected strength in its brands and the ongoing execution of the Conagra Way playbook, as evident from the significant top-line growth. Conagra delivered improved service levels and productivity, which, along with its efforts to combat inflation, helped it sail through inflationary pressures and industry-wide supply-chain hurdles.
Conagra has been encountering cost inflation and supply-chain challenges for a while now. Management expects the inflationary landscape to persist in fiscal 2023. It also continues to anticipate supply-chain hurdles associated with the dynamic landscape. However, gross inflation (input cost inflation before hedging and other sourcing gains) is anticipated to moderate through the remaining part of fiscal 2023.
Apart from this, adjusted SG&A expenses, excluding advertising and promotional (A&P) costs, increased 17.5% to $291 million in the second quarter due to higher incentive compensation. A&P costs came in at $79 million, up 10.3% from the year-ago quarter’s level.
In fiscal 2023, SG&A is likely to increase at a greater rate than sales. Management also expects A&P costs to ramp up.
Pricing Strength & Frozen Category Aid
Conagra’s efficient pricing initiatives have been offering respite amid cost headwinds. In the second quarter of fiscal 2023, the price/mix improved by 17% and aided the organic sales growth of 8.6%. The favorable price/mix was backed by CAG’s inflation-induced pricing actions. The price/mix rose 18.4%, 16%, 12.8% and 18.2% in the Grocery & Snacks, Refrigerated & Frozen, International and Foodservice segments, respectively. The continuation of these upsides is likely to work well for Conagra amid cost inflation.
Conagra’s key frozen and snacks categories remained particularly strong in the second quarter of fiscal 2023, witnessing a solid share performance. Net sales grew 10.5% to $1,421.5 million in the Refrigerated and Frozen segment. Organic sales also rose 10.5% on a price/mix increase of 16%. The company saw an improved share in frozen single-serve meals, plant-based protein and frozen breakfasts.
Moreover, Conagra has been strongly committed to undertaking innovation, which is the key to the company’s success. Prudent innovations have been helping the company modernize its portfolio and meet consumers’ changing needs aptly.
Some of the company’s new products have been top-performing in several categories, such as toppings, plant-based protein and single-serve meals. Conagra earlier said that it expects a sturdy performance from innovations in fiscal 2023.
Wrapping Up
Conagra’s upsides keep it well-placed amid the abovementioned cost headwinds. For fiscal 2023, organic net sales are anticipated to rise 7-8%. The adjusted operating margin is anticipated at 15.3-15.6%.
Management envisions the adjusted EPS in the band of $2.60-$2.70, suggesting 10-14% year-over-year growth. Shares of this Zacks Rank #3 (Hold) company have risen 6.9% in the past six months compared with the industry’s growth of 6.4%.
Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 111.3% from the year-ago reported number.
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5% and 6.1%, respectively, from the corresponding year-ago reported figures.
Vital Farms, which provides pasture-raised products, currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 53.3%, on average.
The Zacks Consensus Estimate for Vital Farms’ current fiscal-year sales suggests an increase of 25.4% from the year-ago reported number.
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Conagra Brands' (CAG) Pricing Efforts Bode Well Amid Cost Woes
Conagra Brands, Inc. (CAG - Free Report) has been benefiting from strength in the frozen category. A focus on innovation has also been a key driver. Apart from this, robust pricing endeavors have been aiding the company amid cost headwinds.
Incidentally, the company’s second-quarter fiscal 2023 results reflected strength in its brands and the ongoing execution of the Conagra Way playbook, as evident from the significant top-line growth. Conagra delivered improved service levels and productivity, which, along with its efforts to combat inflation, helped it sail through inflationary pressures and industry-wide supply-chain hurdles.
Let’s take a closer look at these aspects.
Conagra Brands Price, Consensus and EPS Surprise
Conagra Brands price-consensus-eps-surprise-chart | Conagra Brands Quote
Cost Woes
Conagra has been encountering cost inflation and supply-chain challenges for a while now. Management expects the inflationary landscape to persist in fiscal 2023. It also continues to anticipate supply-chain hurdles associated with the dynamic landscape. However, gross inflation (input cost inflation before hedging and other sourcing gains) is anticipated to moderate through the remaining part of fiscal 2023.
Apart from this, adjusted SG&A expenses, excluding advertising and promotional (A&P) costs, increased 17.5% to $291 million in the second quarter due to higher incentive compensation. A&P costs came in at $79 million, up 10.3% from the year-ago quarter’s level.
In fiscal 2023, SG&A is likely to increase at a greater rate than sales. Management also expects A&P costs to ramp up.
Pricing Strength & Frozen Category Aid
Conagra’s efficient pricing initiatives have been offering respite amid cost headwinds. In the second quarter of fiscal 2023, the price/mix improved by 17% and aided the organic sales growth of 8.6%. The favorable price/mix was backed by CAG’s inflation-induced pricing actions. The price/mix rose 18.4%, 16%, 12.8% and 18.2% in the Grocery & Snacks, Refrigerated & Frozen, International and Foodservice segments, respectively. The continuation of these upsides is likely to work well for Conagra amid cost inflation.
Conagra’s key frozen and snacks categories remained particularly strong in the second quarter of fiscal 2023, witnessing a solid share performance. Net sales grew 10.5% to $1,421.5 million in the Refrigerated and Frozen segment. Organic sales also rose 10.5% on a price/mix increase of 16%. The company saw an improved share in frozen single-serve meals, plant-based protein and frozen breakfasts.
Moreover, Conagra has been strongly committed to undertaking innovation, which is the key to the company’s success. Prudent innovations have been helping the company modernize its portfolio and meet consumers’ changing needs aptly.
Some of the company’s new products have been top-performing in several categories, such as toppings, plant-based protein and single-serve meals. Conagra earlier said that it expects a sturdy performance from innovations in fiscal 2023.
Wrapping Up
Conagra’s upsides keep it well-placed amid the abovementioned cost headwinds. For fiscal 2023, organic net sales are anticipated to rise 7-8%. The adjusted operating margin is anticipated at 15.3-15.6%.
Management envisions the adjusted EPS in the band of $2.60-$2.70, suggesting 10-14% year-over-year growth. Shares of this Zacks Rank #3 (Hold) company have risen 6.9% in the past six months compared with the industry’s growth of 6.4%.
Solid Food Stocks
Some better-ranked food stocks are Post Holdings (POST - Free Report) , General Mills (GIS - Free Report) and Vital Farms (VITL - Free Report) .
Post Holdings, which operates as a consumer-packaged goods company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 34.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year EPS suggests an increase of 111.3% from the year-ago reported number.
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 5% and 6.1%, respectively, from the corresponding year-ago reported figures.
Vital Farms, which provides pasture-raised products, currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 53.3%, on average.
The Zacks Consensus Estimate for Vital Farms’ current fiscal-year sales suggests an increase of 25.4% from the year-ago reported number.