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Conagra (CAG) Q4 Earnings Top Estimates, Decline Y/Y
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Conagra Brands, Inc. (CAG - Free Report) delivered fourth-quarter fiscal 2023 results, with the top line increasing year over year but missing the Zacks Consensus Estimate. The bottom line surpassed the consensus mark but declined from the year-ago quarter’s level.
Results reflect gains from the ongoing execution of the Conagra Way playbook and solid brands. Robust pricing initiatives and efforts to drive gross margin are yielding.
Quarter in Detail
Conagra’s quarterly adjusted earnings per share (EPS) came in at 62 cents, beating the Zacks Consensus Estimate of 60 cents. However, the bottom line declined 4.6% year over year, mainly due to the increased SG&A expenses.
Conagra generated net sales of $2,973.3 million, up 2.2% year over year. However, the metric missed the Zacks Consensus Estimate of $3,020.6 million. Organic net sales also rose 2.2% due to a price/mix, increasing 9.9%. The price/mix was backed by the company’s inflation-induced pricing actions and positive brand mix. The upside was somewhat negated by volumes, which dropped 7.7%, affected by the elasticity effect stemming from pricing actions and supply-chain hurdles.
The adjusted gross profit jumped 11% to $803 million. The adjusted gross margin expanded 216 basis points (bps) to 27%. Gains from increased organic sales and productivity more than offset the effects of the cost of goods sold inflation (including adverse commodity positions) and unfavorable operating leverage. We had expected adjusted gross margin to expand 130 bps to 26.2%.
Adjusted SG&A expenses, excluding advertising and promotional (A&P) costs, increased 24.3% to $301 million due to higher incentive compensation, greater supply chain and technology investments. A&P costs came in at $69 million, up 49.7% from the year-ago quarter’s level.
Adjusted EBITDA (including equity method investment earnings and the pension and post-retirement non-service income) inched up 0.6% to $594 million, mainly led by the higher adjusted gross profit, negated by increased SG&A costs and reduced pension income.
Segment Details
Grocery & Snacks: Quarterly net sales in the segment came in at $1,200 million, up 3.6% year over year. We had expected Grocery & Snacks net sales growth of 4% to $1,205.4 million. Price/mix went up 9.1%, fueled by positive inflation-driven pricing.
Volumes declined 5.5% due to the elasticity impact of inflation-driven pricing actions and shortages stemming from supply-chain bottlenecks. During the quarter, CAG saw share gains in snacking categories like meat snacks and seeds and few staples’ categories like canned pasta, Asian sauces and marinades.
Refrigerated & Frozen: Net sales inched down 1.1% to $1,219.4 million. We had expected Refrigerated & Frozen net sales growth of 4.8% to $1,291.8 million. Price/mix increased 10.4% on favorable pricing action. However, volumes were down 11.5% due to the elasticity impacts of pricing and supply-chain headwind-led shortages. The company saw an improved share in multi serve meals, frozen sides and frozen breakfast sausage.
International: Net sales advanced 8.6% to $250.6 million, reflecting improved organic net sales. We had expected International net sales growth of 3.8% to $239.6 million. However, the adverse impacts of foreign currency translations (to the tune of 0.9%) were a downside. Organic sales rose 9.5%, with the price/mix up 13.8% and volumes down 4.3%. Volumes were hurt by the elasticity effect from inflation-led pricing.
Foodservice: Sales advanced 5.5% to $303.3 million. We had expected Foodservice net sales growth of 8.3% to $311.3 million. The price/mix improved 9.3% on favorable inflation-driven pricing. Volumes declined 3.8%, mainly due to the elasticity impact of inflation-driven pricing actions.
Image Source: Zacks Investment Research
Other Updates
The Zacks Rank #3 (Hold) company exited the quarter with cash and cash equivalents of $93.9 million, senior long-term debt, excluding current installments, of $7,081.3 million and total stockholders’ equity of $8,807.3 million.
The company raised its annual dividend from $1.32 per share to $1.40 per share. Management announced quarterly dividend of 35 cents per share payable on Aug 31, 2023 to shareholders record as of Jul 31.
Guidance
For fiscal 2024, organic net sales are anticipated to rise nearly 1% year over year. The adjusted operating margin is expected in the band of 16-16.5% for fiscal 2024.
Management envisions an adjusted EPS in the range of $2.70-$2.75. The company reported adjusted EPS of $2.77 in fiscal 2023.
For fiscal 2024, capital expenditures are likely to be about $500 million, interest expenses are expected at nearly $450 million and the adjusted effective tax rate is anticipated at around 24%.
Shares of the company have fallen 10.8% in the past three months compared with the industry’s decline of 1.1%.
Solid Staple Bets
Here we have highlighted three top-ranked stocks, namely TreeHouse Foods, Inc. (THS - Free Report) , Lamb Weston Holdings (LW - Free Report) and Celsius Holdings (CELH - Free Report) .
TreeHouse Foods, a manufacturer of packaged foods and beverages, currently sports a Zacks Rank #1 (Strong Buy). THS has a trailing four-quarter earnings surprise of 49.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TreeHouse Foods’ current financial-year sales suggests decline of 12.4%, from the year-ago reported numbers.
Lamb Weston, a leading supplier of frozen potato, sweet potato, appetizer and vegetable products to restaurants and retailers worldwide, currently carries a Zacks Rank #2 (Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 29.6% and 117.3%, respectively, from the year-ago reported numbers. The expected EPS growth rate for three to five years is 42.7%.
Celsius Holdings, which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2. CELH delivered an earnings surprise of 81.8% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal-year sales and earnings suggests growth of 69.6% and 154.4%, respectively, from the year-ago reported numbers.
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Conagra (CAG) Q4 Earnings Top Estimates, Decline Y/Y
Conagra Brands, Inc. (CAG - Free Report) delivered fourth-quarter fiscal 2023 results, with the top line increasing year over year but missing the Zacks Consensus Estimate. The bottom line surpassed the consensus mark but declined from the year-ago quarter’s level.
Results reflect gains from the ongoing execution of the Conagra Way playbook and solid brands. Robust pricing initiatives and efforts to drive gross margin are yielding.
Quarter in Detail
Conagra’s quarterly adjusted earnings per share (EPS) came in at 62 cents, beating the Zacks Consensus Estimate of 60 cents. However, the bottom line declined 4.6% year over year, mainly due to the increased SG&A expenses.
Conagra generated net sales of $2,973.3 million, up 2.2% year over year. However, the metric missed the Zacks Consensus Estimate of $3,020.6 million. Organic net sales also rose 2.2% due to a price/mix, increasing 9.9%. The price/mix was backed by the company’s inflation-induced pricing actions and positive brand mix. The upside was somewhat negated by volumes, which dropped 7.7%, affected by the elasticity effect stemming from pricing actions and supply-chain hurdles.
Conagra Brands Price, Consensus and EPS Surprise
Conagra Brands price-consensus-eps-surprise-chart | Conagra Brands Quote
The adjusted gross profit jumped 11% to $803 million. The adjusted gross margin expanded 216 basis points (bps) to 27%. Gains from increased organic sales and productivity more than offset the effects of the cost of goods sold inflation (including adverse commodity positions) and unfavorable operating leverage. We had expected adjusted gross margin to expand 130 bps to 26.2%.
Adjusted SG&A expenses, excluding advertising and promotional (A&P) costs, increased 24.3% to $301 million due to higher incentive compensation, greater supply chain and technology investments. A&P costs came in at $69 million, up 49.7% from the year-ago quarter’s level.
Adjusted EBITDA (including equity method investment earnings and the pension and post-retirement non-service income) inched up 0.6% to $594 million, mainly led by the higher adjusted gross profit, negated by increased SG&A costs and reduced pension income.
Segment Details
Grocery & Snacks: Quarterly net sales in the segment came in at $1,200 million, up 3.6% year over year. We had expected Grocery & Snacks net sales growth of 4% to $1,205.4 million. Price/mix went up 9.1%, fueled by positive inflation-driven pricing.
Volumes declined 5.5% due to the elasticity impact of inflation-driven pricing actions and shortages stemming from supply-chain bottlenecks. During the quarter, CAG saw share gains in snacking categories like meat snacks and seeds and few staples’ categories like canned pasta, Asian sauces and marinades.
Refrigerated & Frozen: Net sales inched down 1.1% to $1,219.4 million. We had expected Refrigerated & Frozen net sales growth of 4.8% to $1,291.8 million. Price/mix increased 10.4% on favorable pricing action. However, volumes were down 11.5% due to the elasticity impacts of pricing and supply-chain headwind-led shortages. The company saw an improved share in multi serve meals, frozen sides and frozen breakfast sausage.
International: Net sales advanced 8.6% to $250.6 million, reflecting improved organic net sales. We had expected International net sales growth of 3.8% to $239.6 million. However, the adverse impacts of foreign currency translations (to the tune of 0.9%) were a downside. Organic sales rose 9.5%, with the price/mix up 13.8% and volumes down 4.3%. Volumes were hurt by the elasticity effect from inflation-led pricing.
Foodservice: Sales advanced 5.5% to $303.3 million. We had expected Foodservice net sales growth of 8.3% to $311.3 million. The price/mix improved 9.3% on favorable inflation-driven pricing. Volumes declined 3.8%, mainly due to the elasticity impact of inflation-driven pricing actions.
Image Source: Zacks Investment Research
Other Updates
The Zacks Rank #3 (Hold) company exited the quarter with cash and cash equivalents of $93.9 million, senior long-term debt, excluding current installments, of $7,081.3 million and total stockholders’ equity of $8,807.3 million.
The company raised its annual dividend from $1.32 per share to $1.40 per share. Management announced quarterly dividend of 35 cents per share payable on Aug 31, 2023 to shareholders record as of Jul 31.
Guidance
For fiscal 2024, organic net sales are anticipated to rise nearly 1% year over year. The adjusted operating margin is expected in the band of 16-16.5% for fiscal 2024.
Management envisions an adjusted EPS in the range of $2.70-$2.75. The company reported adjusted EPS of $2.77 in fiscal 2023.
For fiscal 2024, capital expenditures are likely to be about $500 million, interest expenses are expected at nearly $450 million and the adjusted effective tax rate is anticipated at around 24%.
Shares of the company have fallen 10.8% in the past three months compared with the industry’s decline of 1.1%.
Solid Staple Bets
Here we have highlighted three top-ranked stocks, namely TreeHouse Foods, Inc. (THS - Free Report) , Lamb Weston Holdings (LW - Free Report) and Celsius Holdings (CELH - Free Report) .
TreeHouse Foods, a manufacturer of packaged foods and beverages, currently sports a Zacks Rank #1 (Strong Buy). THS has a trailing four-quarter earnings surprise of 49.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TreeHouse Foods’ current financial-year sales suggests decline of 12.4%, from the year-ago reported numbers.
Lamb Weston, a leading supplier of frozen potato, sweet potato, appetizer and vegetable products to restaurants and retailers worldwide, currently carries a Zacks Rank #2 (Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 29.6% and 117.3%, respectively, from the year-ago reported numbers. The expected EPS growth rate for three to five years is 42.7%.
Celsius Holdings, which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2. CELH delivered an earnings surprise of 81.8% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal-year sales and earnings suggests growth of 69.6% and 154.4%, respectively, from the year-ago reported numbers.