Conagra Brands Inc. CAG released its third-quarter earnings before the opening bell on March 21. While earnings edged past Zacks consensus estimate, revenue failed to meet expectations.
By the numbers
The company posted earnings of 51 cents per share, ahead of Zacks' estimate of 49 cents. Net income stood at $242.60 million, down from $362.80 million in the prior-year quarter. Revenue grew 35.7% to $2.71 billion, but missed expectations of of $2.75 billion.
Organic sales grew 2% as a result of higher Legacy Conagra volume and improved price-product mix.
The adjusted gross profit was $781 million, while the adjusted gross margin surged to 28.9%.
Segment performance
In the grocey and snack segment, revenue jumped 2.9% year over year to $862.6 million. Organic sales inched up 2.9%.
The refrigerated and frozen division saw net sales growth of 3.3% to $711.2 million due to the Sandwich Bros.' buyout, which contributed 90 basis points to quarterly revenue growth. While organic sales increased 2.4%, volume climbed 3.5%.
International sales dipped 11.4% to $198 million. The company attributed the decline to its divestiture of the Canadian Del Monte business as well as adverse currency movements.
Sales in the company’s foodservice business declined 8.7% to $223 million. Organic sales dipped 0.6% and volumes plummeted 6.7%, while price-product mix surged 6.1%.
The Pinnacle division’s sales totaled $712.3 million. What mainly hindered the company’s quarterly sales was soft performance of the Birds Eye, Wish-Bone and Duncan Hines brands, though management is making an effort to revive sales of these products.
Other business details
Conagra sold its Wesson oil business on Feb. 25, the proceeds of which will be used to lower its debt level in the fourth quarter. The company is also integrating Pinnacle Foods, which resulted in cost savings of $12 million in the third quarter.
Financial forecast
Adjusted earnings per share for fiscal 2019 are estimated to be between $2.03 and $2.08 per share. The company projects organic sales to grow approximately 1%, excluding the sale of Trenton facility. The adjusted gross margin is estimated to be on the lower end of the 29.3% to 29.6% range. On the other hand, the operating margin is expected to be on the higher end of the 14.9% to 15.2% range.
Disclosure: I do not hold any positions in the stocks mentioned.
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