Conagra Brands Inc. (CAG, Financial) released its fourth-quarter 2020 financial results before the market opened on June 30. Both earnings and revenue topped analysts’ expectations thanks to robust digital performance, significant consumer trials and strong replacement sales.
Performance at a glance
Conagra recorded adjusted earnings of 75 cents per share, up 120% from the prior-year quarter. Analysts had anticipated earnings of 65 cents per share. Revenue of $3.3 billion jumped 25.8% and also surpassed projections. Organic net sales increased 21.5%.
The gross profit amounted to $923 million, reflecting a gain of 30.3% year over year due to the cost synergies related with Pinnacle Foods acquisition as well as improved price-mix and supply chain productivity, which was partly offset by higher input costs and pandemic-related costs.
Reflecting on the quarterly performance, Conagra President and CEO Sean Connolly commented:
“We have effectively responded to elevated demand, continued to make good progress on improving the overall business, kept our synergy capture on-track, and begun to launch our fiscal 2021 innovation slate. Not only did we invest to support demand during the quarter, we did it while significantly reducing our leverage."
He added, "Our business clearly benefited from increased at-home eating in the fourth quarter, as the elevated retail demand outweighed the reduced foodservice demand."
Segment details
All of the company’s divisions reported sales growth with the exception of the foodservice segment. Conagra attributed its strong performance to strong organic net sales and positive impact of the 53rd week, which was only partly offset by the divestiture of the Wesson Oil, DSD Snacks and Gelit businesses as well as exiting the private label peanut butter business.
In the grocery and snacks business, sales grew 44.1% to $1.5 billion. Similarly, sales in the refrigerated and frozen foods division climbed 23.3% from the year-ago quarter to $1.4 billion. On the international front, net sales rose 18.6% to $266 million. By contrast, the foodservice segment saw revenue decrease roughly 28% to $193 million.
Guidance
Conagra has continued to witness heightened demand in its retail business in the first quarter so far. On the other hand, foodservice products continue to see a slump in demand. Coronavirus-related expenses have also affected the company’s business.
Factoring in these headwinds, the branded food company has issued guidance for first-quarter 2021. Conagra is guiding for adjusted diluted earnings from continuing operations between 54 cents and 59 cents per share. Organic net sales are expected to grow by around 10% to 13%. The adjusted operating margin is projected to be between 17% and 17.5%.
Disclosure: I do not hold any positions in the stocks mentioned.
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