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Conagra (CAG) Q1 Earnings Top Estimates, Sales Increase Y/Y
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Conagra Brands, Inc. (CAG - Free Report) delivered solid first-quarter fiscal 2023 results, with the top and the bottom line beating the Zacks Consensus Estimate. Net sales and earnings increased year over year. Results gained from strength in the company’s brands and ongoing execution of the Conagra Way playbook. The company delivered improved service and productivity amid ongoing inflationary pressures and industry-wide supply chain hurdles. Management reaffirmed its fiscal 2023 guidance.
Quarter in Detail
Conagra’s quarterly adjusted earnings per share (EPS) came in at 57 cents, beating the Zacks Consensus Estimate of 52 cents. The bottom line increased 14% year over year. This can be attributed to the solid gross profit and impressive performance of CAG’s Ardent Mills joint venture.
Conagra generated net sales of $2,904.3 million, which advanced 9.5% year over year. The figure surpassed the Zacks Consensus Estimate of $2,830.7 million. The year-over-year sales increase was the result of higher organic sales, partly negated by currency headwinds (to the tune of 0.2%).
Organic net sales rose 9.7% due to a price/mix, increasing 14.3%. The price/mix was backed by the company’s inflation-induced pricing actions. The upside was somewhat negated by volumes that dropped 4.6%, affected by the elasticity effect stemming from pricing actions.
The adjusted gross margin contracted 54 basis points to 24.9%. Adjusted SG&A expenses, excluding advertising and promotional (A&P) costs, increased 10.5% to $263 million due to higher incentives compensation. A&P costs came in at $62 million, unchanged from the year-ago quarter’s level.
Adjusted EBITDA (including equity method investment earnings and the pension and post-retirement non-service income) rose 9.1% to $547 million mainly led by higher adjusted gross profit and solid performance from its Ardent Mills joint venture.
Segment Details
Grocery & Snacks: Quarterly net sales in the segment came in at $1,188.3 million, up 10.5% year over year. Organic net sales also rose 10.5%, with the price/mix up 16.6% fueled by positive inflation-driven pricing and brand mix. Volumes declined 6.1%, mainly due to the elasticity impact of inflation-driven pricing actions. During the quarter, CAG saw share gains in snacking categories like meat snacks and microwave popcorn as well as staples categories namely syrup and Asian sauces along with marinades.
Refrigerated & Frozen: Net sales grew 9.6% to $1,207.6 million. Organic sales also rose 9.6% on a price/mix increase of 12.1%. However, volumes were down 2.5% due to the elasticity impacts of pricing. The company saw an improved share in frozen single-serve meals, plant-based protein and frozen breakfast.
International: Net sales declined 1.3% to $233.5 million, reflecting improved organic net sales. However, the adverse impacts of foreign currency translations were a downside. Organic sales rose 1%, with the price/mix up 8.4% and volumes down 7.4%. Volumes were hurt by the elasticity effect from inflation-led pricing.
Foodservice: Sales advanced 14.6% to $274.9 million. Price/mix improved 18.8% on favorable inflation-driven pricing. Volume declined 4.2% mainly due to the elasticity impact of inflation-driven pricing actions.
Other Updates
The Zacks Rank #3 (Hold) company exited the quarter with cash and cash equivalents of $67.4 million, senior long-term debt, excluding current installments, of $7,584.1 million and total stockholders’ equity of $8,576.7 million. During the quarter, Conagra paid out a quarterly dividend of 31.25 cents per share.
Image Source: Zacks Investment Research
Guidance
In the fiscal year, gross inflation (input cost inflation before hedging and other sourcing gains) is anticipated in the low-teens range. Conagra does not expect the solid performance from its Ardent Mills joint venture to continue through fiscal 2023, thanks to the volatility of the business.
For fiscal 2023, organic net sales are anticipated to rise 4-5% year over year. The adjusted operating margin is anticipated to be nearly 15%. The adjusted EPS growth is envisioned at 1-5%.
For fiscal 2023, capital expenditures are likely to be about $500 million, the interest expenses are expected at roughly $410 million and the effective tax rate is anticipated at around 24%. Management expects the pension income to be nearly $25 million.
Shares of CAG have fallen 1.8% in the past six months compared with the industry’s decline of 7.1%.
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks Rank of 1 (Strong Buy). LANC delivered an earnings surprise of 170% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lancaster Colony’s current financial year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
Hershey, the largest chocolate manufacturer in North America as well as a global leader in chocolate and non-chocolate confectionery, presently has a Zacks Rank #2 (Buy). HSY pulled off a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Hershey’s sales and EPS for the current financial year suggests respective growth of 13.9% and 14.4% from the year-ago reported figures.
J. M. Smucker, which manufactures and markets branded food and beverage products, carries a Zacks Rank #2. J. M. Smucker delivered a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for SJM’s current financial year sales suggests growth of 4.4% from the year-ago period’s reported figure.
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Conagra (CAG) Q1 Earnings Top Estimates, Sales Increase Y/Y
Conagra Brands, Inc. (CAG - Free Report) delivered solid first-quarter fiscal 2023 results, with the top and the bottom line beating the Zacks Consensus Estimate. Net sales and earnings increased year over year. Results gained from strength in the company’s brands and ongoing execution of the Conagra Way playbook. The company delivered improved service and productivity amid ongoing inflationary pressures and industry-wide supply chain hurdles. Management reaffirmed its fiscal 2023 guidance.
Quarter in Detail
Conagra’s quarterly adjusted earnings per share (EPS) came in at 57 cents, beating the Zacks Consensus Estimate of 52 cents. The bottom line increased 14% year over year. This can be attributed to the solid gross profit and impressive performance of CAG’s Ardent Mills joint venture.
Conagra generated net sales of $2,904.3 million, which advanced 9.5% year over year. The figure surpassed the Zacks Consensus Estimate of $2,830.7 million. The year-over-year sales increase was the result of higher organic sales, partly negated by currency headwinds (to the tune of 0.2%).
Organic net sales rose 9.7% due to a price/mix, increasing 14.3%. The price/mix was backed by the company’s inflation-induced pricing actions. The upside was somewhat negated by volumes that dropped 4.6%, affected by the elasticity effect stemming from pricing actions.
Conagra Brands Price, Consensus and EPS Surprise
Conagra Brands price-consensus-eps-surprise-chart | Conagra Brands Quote
The adjusted gross margin contracted 54 basis points to 24.9%. Adjusted SG&A expenses, excluding advertising and promotional (A&P) costs, increased 10.5% to $263 million due to higher incentives compensation. A&P costs came in at $62 million, unchanged from the year-ago quarter’s level.
Adjusted EBITDA (including equity method investment earnings and the pension and post-retirement non-service income) rose 9.1% to $547 million mainly led by higher adjusted gross profit and solid performance from its Ardent Mills joint venture.
Segment Details
Grocery & Snacks: Quarterly net sales in the segment came in at $1,188.3 million, up 10.5% year over year. Organic net sales also rose 10.5%, with the price/mix up 16.6% fueled by positive inflation-driven pricing and brand mix. Volumes declined 6.1%, mainly due to the elasticity impact of inflation-driven pricing actions. During the quarter, CAG saw share gains in snacking categories like meat snacks and microwave popcorn as well as staples categories namely syrup and Asian sauces along with marinades.
Refrigerated & Frozen: Net sales grew 9.6% to $1,207.6 million. Organic sales also rose 9.6% on a price/mix increase of 12.1%. However, volumes were down 2.5% due to the elasticity impacts of pricing. The company saw an improved share in frozen single-serve meals, plant-based protein and frozen breakfast.
International: Net sales declined 1.3% to $233.5 million, reflecting improved organic net sales. However, the adverse impacts of foreign currency translations were a downside. Organic sales rose 1%, with the price/mix up 8.4% and volumes down 7.4%. Volumes were hurt by the elasticity effect from inflation-led pricing.
Foodservice: Sales advanced 14.6% to $274.9 million. Price/mix improved 18.8% on favorable inflation-driven pricing. Volume declined 4.2% mainly due to the elasticity impact of inflation-driven pricing actions.
Other Updates
The Zacks Rank #3 (Hold) company exited the quarter with cash and cash equivalents of $67.4 million, senior long-term debt, excluding current installments, of $7,584.1 million and total stockholders’ equity of $8,576.7 million. During the quarter, Conagra paid out a quarterly dividend of 31.25 cents per share.
Image Source: Zacks Investment Research
Guidance
In the fiscal year, gross inflation (input cost inflation before hedging and other sourcing gains) is anticipated in the low-teens range. Conagra does not expect the solid performance from its Ardent Mills joint venture to continue through fiscal 2023, thanks to the volatility of the business.
For fiscal 2023, organic net sales are anticipated to rise 4-5% year over year. The adjusted operating margin is anticipated to be nearly 15%. The adjusted EPS growth is envisioned at 1-5%.
For fiscal 2023, capital expenditures are likely to be about $500 million, the interest expenses are expected at roughly $410 million and the effective tax rate is anticipated at around 24%. Management expects the pension income to be nearly $25 million.
Shares of CAG have fallen 1.8% in the past six months compared with the industry’s decline of 7.1%.
Some Stocks to Consider
Some top-ranked stocks are Lancaster Colony (LANC - Free Report) , Hershey (HSY - Free Report) and The J. M. Smucker (SJM - Free Report) .
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks Rank of 1 (Strong Buy). LANC delivered an earnings surprise of 170% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lancaster Colony’s current financial year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
Hershey, the largest chocolate manufacturer in North America as well as a global leader in chocolate and non-chocolate confectionery, presently has a Zacks Rank #2 (Buy). HSY pulled off a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Hershey’s sales and EPS for the current financial year suggests respective growth of 13.9% and 14.4% from the year-ago reported figures.
J. M. Smucker, which manufactures and markets branded food and beverage products, carries a Zacks Rank #2. J. M. Smucker delivered a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for SJM’s current financial year sales suggests growth of 4.4% from the year-ago period’s reported figure.