Key Takeaways From Conagra Brands' 4th-Quarter Earnings

Conagra puts money into the frozen foods business

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Jun 29, 2018
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Packaged-foods company Conagra Brands came out with its fourth-quarter earnings. The company’s profit in the fourth quarter amounted to $69.6 million or 18 cents per share, down from $151.3 million or 36 cents per share reported in the year-ago quarter.

By the numbers

The company’s fourth quarter revenue was $1.97 billion that represents a 5.9% sales growth on a year over year basis. Earnings per share during the same period came in at 50 cents versus 37 cents reported in the fourth quarter of previous year.

The company’s adjusted Selling, General and Administrative Expenses, or SG&A, for the quarter climbed 3.4% and were 11.1% to net sales while the same was $798 million for the whole year and 10.1% of net sales.

Adjusted operating profit in the fourth quarter soared 16.4% while the same spiked 3.5% for the whole year. Adjusted operating profit was 15% in the fourth quarter and 16.1% for the whole year.

Conagra’s organic sales, excluding currency and acquisitions, surged 2% in the fourth quarter.

For the year, the company produced $920 million of net cash flow from operating activity for continuing operations. The company’s capital expenditure during the same period came in at $252 million. At the end of the year, the company’s total debt was $3.8 billion whereas cash on hand was roughly $3.8 billion.

The Pinnacle Foods deal

The company said that it plans to buy Pinnacle Foods, a company that specializes in frozen food categories, in a cash-and-stock transaction valued at about $8.1 billion. The Conagra-Pinnacle partnership would lead to the creation of the second-largest U.S. frozen food company behind Nestle. The rationale behind putting money into the frozen foods business was the fact that millennials are becoming aware of the cost and health benefits of eating frozen.

Recently, both Conagra and Pinnacle posted sales growth in their frozen products. Conagra already has one frozen brand by the name of Marie Callender that brings annual revenue exceeding $1 billion. Birds Eye, Pinnacle’s frozen brand, also contributes an equal amount to the company’s annual revenue. Hence, the integration of both these companies would definitely result in mutual benefits and overall customer satisfaction.

Outlook

The company projects net sales growth of around 0.5% to 1.5% for fiscal 2029. The company anticipates organic net sales growth to be in the range of 1% to 2%. The effective tax rate is projected to be in the range of 23% to 24%. The company, however, did not provide guidance with respect to earnings per share due to the pending Pinnacle deal.

Disclosure: I do not hold any position in the stock mentioned in this article.