Boosted by shoppers buying higher-priced items, fewer promotional activities and a rate hike in its foodservice business, packaged foods company Conagra Brands Inc. (CAG, Financial) reported strong third-quarter 2021 financials before the opening bell on Thursday.
For the three months ended Feb. 28, the Chicago-based company, which owns the Duncan Hines, Birds Eye and Healthy Choice brands, among others, posted adjusted earnings of 59 cents per share, topping Refinitiv's estimates by a cent.
Revenue grew 8.5% from the prior-year quarter to $2.77 billion, beating expectations of $2.72 billion. Conagra noted the overall sales growth primarily reflects an increase in organic net sales as well as a 1.2% net decrease resulting from the divestiture of its Lender's bagel, H.K. Anderson and Peter Pan peanut butter businesses.
While sales growth in the grocery and snacks and frozen foods divisions were driven up more than 10% each by higher at-home consumption during the Covid-19 pandemic, the foodservice segment recorded a 17.2% decrease as a result of lower restaurant traffic. The international division also recorded a 9% sales increase on the back of strong demand for its snacks, staple foods and frozen products.
According to President and CEO Sean Connolly, this trend is expected to continue.
"We remain confident that each of our retail domains – frozen, snacks and staples - is well-positioned to sustain the benefits of the eat-at-home habits consumers have developed during the Covid-19 pandemic," he said. "Our continued business momentum, coupled with our disciplined approach to investment, reinforces our confidence in the long-term potential of the business and our ability to create sustained value for our shareholders."
Looking toward the fourth quarter, Conagra is anticipating organic net sales to decline between 10% and 12%. The company is also projecting adjusted earnings of 49 cents to 55 cents per share, which is above analysts' forecasts of 51 cents.
The company also reaffirmed its fiscal 2022 guidance of 1% to 2% organic net sales growth, adjusted earnings of $2.63 to $2.73 per share and an adjusted operating margin of 18% to 19%.
Conagra Brands also noted it repurchased approximately 8.8 million shares for $298 million during the third quarter and paid a dividend of 27.5 cents per share.
With an $18.06 billion market cap, shares of Conagra Brands were down 0.39% on Thursday morning at $37.10. GuruFocus estimates the stock has gained nearly 20% over the past year.
Disclosure: No positions.
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