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Conagra Q1 Earnings & Revenues Beat Estimates on Lower SG&A
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Key Takeaways
Conagra Brands' Q1 EPS rose 5.1% to 41 cents, while net sales fell 1.4% to $2.6 billion.
CAG's lower SG&A and higher equity income helped offset weaker volumes and gross margin pressure.
Conagra Brands reaffirmed FY27 guidance for a 1-3% organic sales decline and EPS of $1.40-$1.50.
Conagra Brands, Inc. (CAG - Free Report) reported first-quarter fiscal 2027 results, wherein both top and bottom lines beat the Zacks Consensus Estimate. While net sales decreased, earnings increased from the year-ago period’s actuals.
CAG’s Quarterly Performance: Key Metrics and Insights
Conagra Brands’ adjusted earnings per share (EPS) for the quarter were 41 cents, beating the Zacks Consensus Estimate of 31 cents. The bottom line increased 5.1% year over year.
Net sales fell 1.4% to $2,595.9 million, slightly exceeding the Zacks Consensus Estimate of $2,595 million. Reported sales included a 0.2% favorable foreign-exchange impact and a 0.5% drag from M&A.
Organic net sales declined 1.1%, as a 2.1% volume drop more than offset a 1% price/mix benefit. The company gained dollar share in frozen vegetables, pudding, chili, frozen breakfast, hot dogs and frozen desserts. We anticipated volumes to fall 2.4% while expecting a 1.2% pricing gain.
Adjusted gross profit decreased 3.9% to $618.6 million, while adjusted gross margin contracted 62 basis points to 23.8%. Higher productivity and about $4 million of tariff refunds were more than offset by cost-of-goods-sold inflation, lower organic sales and unfavorable operating leverage. Our model projected adjusted gross margin contraction of about 100 basis points to 23.4%.
Adjusted SG&A declined 3.7% to $320.7 million, including a $10 million benefit tied to fiscal 2026 incentive compensation. Advertising and promotional spending increased 15.1% to $60.9 million. Adjusted EBITDA increased 2.4% to $451.4 million.
Decoding CAG’s Segmental Performance
Grocery & Snacks: Net sales declined 2.6% to $1,051.1 million, while organic sales fell 2%. A 3.4% increase in price/mix was outweighed by a 5.4% volume decline. Adjusted operating profit decreased 7.2% to $204.9 million.
Refrigerated & Frozen: Net sales fell 2.1% to $1,053.8 million, with organic sales down 1.6%. Price/mix declined 1.5% and volume slipped 0.1%. Adjusted operating profit dropped 13% to $99.6 million as inflation, operating leverage and higher advertising investment offset productivity gains.
International: Sales increased 2.7% to $218.1 million, helped by foreign exchange, while organic sales rose 0.9%. Price/mix advanced 1.6%, partly offset by a 0.7% volume decline. Adjusted operating profit fell 8.6% to $34.4 million.
Foodservice: Net sales grew 3.2% to $272.9 million, while organic sales increased 3.3%. Volume rose 2.5%, including an approximately 150-basis-point benefit from customer-order timing, and price/mix gained 0.8%. Adjusted operating profit increased 11.4% to $30.9 million.
CAG’s Financial Health
Net cash used in operating activities was $4.2 million. Capital expenditures totaled $123.7 million, resulting in negative free cash flow of $127.9 million.
CAG ended the quarter with net debt of $7,388.5 million, down 2.5% year over year. The net leverage ratio was 3.99X. The company also paid $167.5 million in dividends during the quarter.
What to Expect From CAG in FY27?
Management reaffirmed its fiscal 2027 outlook for an organic net sales decline of 1-3%, an adjusted operating margin of 10-10.5% and adjusted earnings of $1.40-$1.50 per share.
The guidance continues to assume equity earnings of about $140 million and free cash flow conversion above 90%.
This Zacks Rank #4 (Sell) stock has fallen 1.2% in the past three months compared with the industry’s decline of 3.9%.
Image Source: Zacks Investment Research
Stocks to Consider
The Chefs' Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. At present, CHEF flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Chefs' Warehouse’s current fiscal-year sales and earnings implies growth of 10.8% and 33.7%, respectively, from the year-ago reported figures. Chefs' Warehouse delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Luckin Coffee Inc. (LKNCY - Free Report) offers retail services of freshly brewed drinks and pre-made food and beverage items in the People's Republic of China. The company currently sports a Zacks Rank of 1. LKNCY delivered a trailing four-quarter earnings surprise of 6.6%, on average.
The Zacks Consensus Estimate for Luckin Coffee’s current financial-year sales and earnings indicates growth of 33.3% and 40.8%, respectively, from the prior-year reported levels.
Lamb Weston Holdings, Inc. (LW - Free Report) engages in the production, distribution and marketing of frozen potato products in the United States, Canada, Mexico and internationally, and presently carries a Zacks Rank of 2. LW delivered a trailing four-quarter earnings surprise of 24.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year earnings indicates growth of 1.7% from the year-ago numbers.
View the Zacks #1 Rank List
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Conagra Q1 Earnings & Revenues Beat Estimates on Lower SG&A
Key Takeaways
Conagra Brands, Inc. (CAG - Free Report) reported first-quarter fiscal 2027 results, wherein both top and bottom lines beat the Zacks Consensus Estimate. While net sales decreased, earnings increased from the year-ago period’s actuals.
CAG’s Quarterly Performance: Key Metrics and Insights
Conagra Brands’ adjusted earnings per share (EPS) for the quarter were 41 cents, beating the Zacks Consensus Estimate of 31 cents. The bottom line increased 5.1% year over year.
Conagra Brands Price, Consensus and EPS Surprise
Conagra Brands price-consensus-eps-surprise-chart | Conagra Brands Quote
Net sales fell 1.4% to $2,595.9 million, slightly exceeding the Zacks Consensus Estimate of $2,595 million. Reported sales included a 0.2% favorable foreign-exchange impact and a 0.5% drag from M&A.
Organic net sales declined 1.1%, as a 2.1% volume drop more than offset a 1% price/mix benefit. The company gained dollar share in frozen vegetables, pudding, chili, frozen breakfast, hot dogs and frozen desserts. We anticipated volumes to fall 2.4% while expecting a 1.2% pricing gain.
Adjusted gross profit decreased 3.9% to $618.6 million, while adjusted gross margin contracted 62 basis points to 23.8%. Higher productivity and about $4 million of tariff refunds were more than offset by cost-of-goods-sold inflation, lower organic sales and unfavorable operating leverage. Our model projected adjusted gross margin contraction of about 100 basis points to 23.4%.
Adjusted SG&A declined 3.7% to $320.7 million, including a $10 million benefit tied to fiscal 2026 incentive compensation. Advertising and promotional spending increased 15.1% to $60.9 million. Adjusted EBITDA increased 2.4% to $451.4 million.
Decoding CAG’s Segmental Performance
Grocery & Snacks: Net sales declined 2.6% to $1,051.1 million, while organic sales fell 2%. A 3.4% increase in price/mix was outweighed by a 5.4% volume decline. Adjusted operating profit decreased 7.2% to $204.9 million.
Refrigerated & Frozen: Net sales fell 2.1% to $1,053.8 million, with organic sales down 1.6%. Price/mix declined 1.5% and volume slipped 0.1%. Adjusted operating profit dropped 13% to $99.6 million as inflation, operating leverage and higher advertising investment offset productivity gains.
International: Sales increased 2.7% to $218.1 million, helped by foreign exchange, while organic sales rose 0.9%. Price/mix advanced 1.6%, partly offset by a 0.7% volume decline. Adjusted operating profit fell 8.6% to $34.4 million.
Foodservice: Net sales grew 3.2% to $272.9 million, while organic sales increased 3.3%. Volume rose 2.5%, including an approximately 150-basis-point benefit from customer-order timing, and price/mix gained 0.8%. Adjusted operating profit increased 11.4% to $30.9 million.
CAG’s Financial Health
Net cash used in operating activities was $4.2 million. Capital expenditures totaled $123.7 million, resulting in negative free cash flow of $127.9 million.
CAG ended the quarter with net debt of $7,388.5 million, down 2.5% year over year. The net leverage ratio was 3.99X. The company also paid $167.5 million in dividends during the quarter.
What to Expect From CAG in FY27?
Management reaffirmed its fiscal 2027 outlook for an organic net sales decline of 1-3%, an adjusted operating margin of 10-10.5% and adjusted earnings of $1.40-$1.50 per share.
The guidance continues to assume equity earnings of about $140 million and free cash flow conversion above 90%.
This Zacks Rank #4 (Sell) stock has fallen 1.2% in the past three months compared with the industry’s decline of 3.9%.
Image Source: Zacks Investment Research
Stocks to Consider
The Chefs' Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. At present, CHEF flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Chefs' Warehouse’s current fiscal-year sales and earnings implies growth of 10.8% and 33.7%, respectively, from the year-ago reported figures. Chefs' Warehouse delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Luckin Coffee Inc. (LKNCY - Free Report) offers retail services of freshly brewed drinks and pre-made food and beverage items in the People's Republic of China. The company currently sports a Zacks Rank of 1. LKNCY delivered a trailing four-quarter earnings surprise of 6.6%, on average.
The Zacks Consensus Estimate for Luckin Coffee’s current financial-year sales and earnings indicates growth of 33.3% and 40.8%, respectively, from the prior-year reported levels.
Lamb Weston Holdings, Inc. (LW - Free Report) engages in the production, distribution and marketing of frozen potato products in the United States, Canada, Mexico and internationally, and presently carries a Zacks Rank of 2. LW delivered a trailing four-quarter earnings surprise of 24.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year earnings indicates growth of 1.7% from the year-ago numbers.