Conagra Brands Inc. (CAG, Financial) released its first-quarter results before the opening bell on Sept. 26. While earnings topped analysts’ estimates, revenue fell short of expectations.
Earnings highlights
The branded food company posted adjusted earnings of 43Ă‚ cents per share, down 8.5% from the prior-year quarter. Analysts were anticipating earnings of 39 per share. Revenue of $2.39 billion, however, lagged projections of $2.48 billion.
The gross margin climbed 29% in the reported quarter to $676 million on the back of contributions from the Pinnacle acquisition as well as improved price-mix and supply chain productivity, which was partly offset by loss of profits from divestitures, poor organic sales and higher input costs.
Segment performance
Conagra attributed its strong performance to the acquisition of Pinnacle Foods, which was partially offset by the divestiture of the Wesson Oil and Canadian Del Monte businesses as well as weaknesses in several other areas.
In the Grocery and Snacks division, sales grew 26.9% to $978 million.Ă‚ Similarly, sales in the Refrigerated and Frozen segment grew 51% from the year-ago quarter to $959 million. On the international front, net sales grew 5.5% to $204 million and the Foodservice business saw revenue increase 6.3% to $250 million.
Financial forecast
For fiscal 2020, Conagra is guiding for adjusted earnings between $2.08 and $2.18 per share, while net sales are expected to grow between 13.5% and 14%. Organic net sales are projected to grow 1% to 1.5%.
"Our expectation for fiscal 2020 is that the investments we are making in the first half of the year, in particular the second quarter, will result in strong second half performance, with the impacts of new innovation in the frozen and snacks businesses, smart promotional support in key grocery brands, the continued implementation of our Pinnacle improvement plan, and the impact of synergy capture all greatest in the third and fourth quarters” CEO Sean Connolly said.
Disclosure: I do not hold any positions in the stock mentioned in the article.
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