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Conagra's (CAG) Q1 Earnings Likely to be Hurt by Input Costs

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Conagra Brands, Inc. (CAG - Free Report) is scheduled to release first-quarter fiscal 2020 results on Sep 26. The company has a mixed history of earnings surprises in the trailing four quarters. In the last reported quarter, the bottom line missed the Zacks Consensus Estimate by 14.3%. Let’s see what’s in store for the company in the upcoming quarterly announcement.

Factors Likely to Impact Q1 Results

A strong brand portfolio is adding sheen to Conagra. Markedly, acquisitions have played a vital role in expanding the company’s brand strength. In this context, the buyout of Pinnacle Foods is yielding as witnessed in the fourth and the third quarter of fiscal 2019. Conagra is on track with the integration process of the buyout as well as realizing synergies from the same. Moreover, management is boosting some of its business banners, especially the Gardein brand. We expect Pinnacle Foods along with other acquired entities like Sandwich Bros. and Angie's Artisan Treats, LLC, to continue supporting the company’s top line in the to-be-reported quarter.

This apart, Conagra is focusing on innovations and brand-building efforts for exploring prospects in frozen and snacking businesses. Also, the company’s value-over-volume strategy is lucrative. Such initiatives are likely to drive results in the quarter to be reported.

Conagra Brands Inc. Price, Consensus and EPS Surprise

In spite of the aforementioned upsides, there are certain headwinds that are likely to exert pressure on the upcoming quarterly announcement. We note that the company’s Foodservice segment has been weak for quite some time, thanks to business exits. The divestitures of Wesson oil business and Trenton facility dragged performance during the fourth quarter. Adverse impacts from such divestitures is likely to weigh on first-quarter results as well.

Moreover, the company continues to anticipate input cost inflation in the to-be-reported quarter. The company is witnessing inflation in areas such as transportation, crops and packaging. Notably, rising input costs are denting the performance of other food players like Campbell Soup (CPB - Free Report) , Lamb Weston (LW - Free Report) and General Mills (GIS - Free Report) . Besides, the impact of any adverse currency fluctuation on Conagra’s quarterly results cannot be ignored. Such headwinds are likely to dent the company’s bottom line in the to-be-reported quarter.

Which Way Are Estimates Treading?

The Zacks Consensus Estimate for fiscal first-quarter earnings is pegged at 40 cents, which suggests a decline of 14.9% from the year-ago quarter's level. The current estimate has been stable in the past 30 days.

Further, the consensus mark for revenues is pegged at $2,482 million, calling for growth of approximately 34.3% from the year-ago quarter’s figure.

What Does the Zacks Model Unveil?

Our proven model doesn’t show that Conagra is likely to beat bottom-line estimates in the to-be-reported quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Although Conagra has a Zacks Rank #3, its Earnings ESP of -4.52% makes us apprehensive about earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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