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Conagra Brands (CAG) Troubled by Slowdown in Consumption Trends
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Conagra Brands, Inc. (CAG - Free Report) has not been in its best shape lately, witnessing challenging industry trends, including a slowdown in consumption. This was reflected in the company’s fourth-quarter fiscal 2024 results as well as management’s guidance for fiscal 2025. Conagra has been making solid brand-building investments. While these strategic investments are crucial for long-term growth, they may weigh on short-term profitability.
Estimates Lose Sheen
The Zacks Consensus Estimate for the current quarter and fiscal year earnings per share has declined by a penny each over the past 30 days to 59 cents and $2.62, respectively. The consensus mark for the next fiscal EPS has also gone down from $2.73 to $2.70 in the same time frame. This downward adjustment reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.
Image Source: Zacks Investment Research
Soft Consumption Trends Hurt
Conagra continued to witness challenging industry trends, including a slowdown in consumption in the fourth quarter of fiscal 2024. During the quarter, volumes dropped 1.8% year over year, hurting the company’s organic sales, which fell 2.4%. Volumes declined as a result of the continuation of the industry-wide slowdown in consumption and the recent changes in consumer behavior.
Industry-wide macroeconomic challenges have adversely impacted consumer purchasing patterns. For fiscal 2025, organic net sales growth is anticipated to be in the range of 1.5% decline to flat. Management expects first-quarter volumes to be the lowest, with improvements anticipated as the year progresses.
Conagra’s Foodservice unit has been under pressure due to sluggish consumption trends, reflecting broader industry challenges. The segment’s reported organic sales declined 3.9% year over year to $291.4 million in the fourth quarter. Although the price/mix improved 6.4%, volumes declined 10.3% due to the ongoing effects of the previously unveiled lost business, along with the current sluggishness in restaurant traffic. The persistence of this trend remains a concern as the segment continues to navigate a tough operating environment with ongoing pressures on consumer demand and dining-out behavior.
Cost Concerns
Conagra has been encountering cost inflation for a while now, though the trend has been moderating of late. In the fourth quarter of fiscal 2024, the adjusted gross margin was partly affected by the inflated cost of goods sold, soft organic sales and adverse operating leverage. Additionally, Conagra remains focused on ramping up brand-building investments in fiscal 2025 to enhance volumes and market share. While crucial for long-term growth, these investments may impact near-term profits.
Management’s fiscal 2025 EPS view suggests a decline from the year-ago period. Conagra envisions an adjusted EPS in the range of $2.60-$2.65 in fiscal 2025 compared with $2.67 recorded in fiscal 2024.
Wrapping Up
Despite Conagra’s recent market share gains in key categories like frozen foods and snacks, the company continues to face significant challenges. While its strong brands and innovative efforts have helped modernize its portfolio, these upsides are overshadowed by broader industry headwinds and consumption slowdowns. As Conagra continues to navigate these headwinds, its ability to stabilize consumption trends and manage cost pressures will be crucial in determining its performance in the coming fiscal year.
Investors should remain cautious, keeping a close eye on how the company manages these challenges. Conagra presently carries a Zacks Rank #4 (Sell). The company’s shares have dipped 0.1% in the past three months compared with the industry’s decline of 1.5%.
Better-Ranked Staple Bets
The Chef’s Warehouse (CHEF - Free Report) , which distributes specialty food and center-of-the-plate products, has a trailing four-quarter earnings surprise of 33.7%, on average. CHEF currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current financial-year sales and earnings calls for growth of 9.7% and 12.6%, respectively, from the prior-year reported level.
Vital Farms (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2 (Buy). VITL has a trailing four-quarter earnings surprise of 82.5%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year earnings indicates growth of 72.9% from the year-ago reported numbers.
Nomad Foods (NOMD - Free Report) , carrying a Zacks Rank #2, manufactures and distributes frozen foods. NOMD has a trailing four-quarter earnings surprise of 3.1%, on average.
The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales and earnings implies growth of 4.3% and 11.5%, respectively, from the prior-year reported level.
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Conagra Brands (CAG) Troubled by Slowdown in Consumption Trends
Conagra Brands, Inc. (CAG - Free Report) has not been in its best shape lately, witnessing challenging industry trends, including a slowdown in consumption. This was reflected in the company’s fourth-quarter fiscal 2024 results as well as management’s guidance for fiscal 2025. Conagra has been making solid brand-building investments. While these strategic investments are crucial for long-term growth, they may weigh on short-term profitability.
Estimates Lose Sheen
The Zacks Consensus Estimate for the current quarter and fiscal year earnings per share has declined by a penny each over the past 30 days to 59 cents and $2.62, respectively. The consensus mark for the next fiscal EPS has also gone down from $2.73 to $2.70 in the same time frame. This downward adjustment reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.
Image Source: Zacks Investment Research
Soft Consumption Trends Hurt
Conagra continued to witness challenging industry trends, including a slowdown in consumption in the fourth quarter of fiscal 2024. During the quarter, volumes dropped 1.8% year over year, hurting the company’s organic sales, which fell 2.4%. Volumes declined as a result of the continuation of the industry-wide slowdown in consumption and the recent changes in consumer behavior.
Industry-wide macroeconomic challenges have adversely impacted consumer purchasing patterns. For fiscal 2025, organic net sales growth is anticipated to be in the range of 1.5% decline to flat. Management expects first-quarter volumes to be the lowest, with improvements anticipated as the year progresses.
Conagra’s Foodservice unit has been under pressure due to sluggish consumption trends, reflecting broader industry challenges. The segment’s reported organic sales declined 3.9% year over year to $291.4 million in the fourth quarter. Although the price/mix improved 6.4%, volumes declined 10.3% due to the ongoing effects of the previously unveiled lost business, along with the current sluggishness in restaurant traffic. The persistence of this trend remains a concern as the segment continues to navigate a tough operating environment with ongoing pressures on consumer demand and dining-out behavior.
Cost Concerns
Conagra has been encountering cost inflation for a while now, though the trend has been moderating of late. In the fourth quarter of fiscal 2024, the adjusted gross margin was partly affected by the inflated cost of goods sold, soft organic sales and adverse operating leverage. Additionally, Conagra remains focused on ramping up brand-building investments in fiscal 2025 to enhance volumes and market share. While crucial for long-term growth, these investments may impact near-term profits.
Management’s fiscal 2025 EPS view suggests a decline from the year-ago period. Conagra envisions an adjusted EPS in the range of $2.60-$2.65 in fiscal 2025 compared with $2.67 recorded in fiscal 2024.
Wrapping Up
Despite Conagra’s recent market share gains in key categories like frozen foods and snacks, the company continues to face significant challenges. While its strong brands and innovative efforts have helped modernize its portfolio, these upsides are overshadowed by broader industry headwinds and consumption slowdowns. As Conagra continues to navigate these headwinds, its ability to stabilize consumption trends and manage cost pressures will be crucial in determining its performance in the coming fiscal year.
Investors should remain cautious, keeping a close eye on how the company manages these challenges. Conagra presently carries a Zacks Rank #4 (Sell). The company’s shares have dipped 0.1% in the past three months compared with the industry’s decline of 1.5%.
Better-Ranked Staple Bets
The Chef’s Warehouse (CHEF - Free Report) , which distributes specialty food and center-of-the-plate products, has a trailing four-quarter earnings surprise of 33.7%, on average. CHEF currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current financial-year sales and earnings calls for growth of 9.7% and 12.6%, respectively, from the prior-year reported level.
Vital Farms (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2 (Buy). VITL has a trailing four-quarter earnings surprise of 82.5%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year earnings indicates growth of 72.9% from the year-ago reported numbers.
Nomad Foods (NOMD - Free Report) , carrying a Zacks Rank #2, manufactures and distributes frozen foods. NOMD has a trailing four-quarter earnings surprise of 3.1%, on average.
The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales and earnings implies growth of 4.3% and 11.5%, respectively, from the prior-year reported level.