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Conagra Brands (CAG) Down 1.4% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Conagra Brands (CAG - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Conagra Brands due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Conagra Q1 Earnings Lag Estimates, Organic Sales Decline Y/Y
Conagra Brands posted soft first-quarter fiscal 2025 results, wherein the bottom and top lines declined year over year and fell short of the respective Zacks Consensus Estimate. Despite the ongoing difficult landscape, Conagra progressed well on its key priorities. Domestic retail volumes met the company’s expectations, market share expanded across the portfolio, and progress was made on portfolio reshaping initiatives.
CAG’s Quarterly Performance: Key Metrics and Insights
Conagra’s quarterly adjusted earnings per share (EPS) came in at 53 cents, which fell short of the Zacks Consensus Estimate of 59 cents, delivering a negative surprise of -10.2%. The company’s bottom line declined 19.7% year over year.
The company generated net sales of $2,794.9 million, which declined 3.8% year over year and missed the Zacks Consensus Estimate of $2,839 million. The top line included a 0.4% negative impact of currency movements. Organic net sales declined 3.5% year over year due to a 1.6% drop in volumes and a 1.9% adverse effect from price/mix as a result of elevated strategic investments. Results were also affected by temporary manufacturing hurdles in the Hebrew National business during the key grilling season.
The adjusted gross profit declined 9.4% year over year at $726 million. The adjusted gross margin contracted 163 basis points (bps) to 26%. The gross profit was hurt by lower organic net sales, cost of goods sold inflation, adverse operating leverage and the impacts of the abovementioned manufacturing disruptions, partly made up by higher productivity.
Adjusted SG&A expenses, excluding advertising and promotional costs, escalated 7.3% year over year on account of elevated incentive compensation. Adjusted EBITDA (including equity method investment earnings and the pension and post-retirement non-service income) came in at $528 million, down 13.8% year over year.
Decoding CAG’s Segmental Performance
Grocery & Snacks: Quarterly net sales in the segment came in at $1,182.7 million, down 1.7% year over year. Organic sales fell 1.9% due to a 1.8% drop in volumes and a 0.1% dip in price/mix. We had expected segment volumes to drop 1.3%. The company witnessed a 0.2% favorable impact from M&A. During the quarter, CAG saw dollar share gains in snacking categories like microwave popcorn, pudding, pickles and seeds.
Refrigerated & Frozen: Net sales and organic sales declined 5.7% year over year to $1,086.4 million. The price/mix fell 5.8%, with volumes up 0.1%. The company saw dollar share gains in frozen single-serve meals, frozen multi-serve meals and frozen breakfasts.
International: Net sales dropped 0.4% year over year to $259.1 million, reflecting improved organic net sales (up 3%) and negative currency effects (3.4%). Organic sales growth was driven by the price/mix (which climbed 2.4%) and volumes (which rose 0.6% due to strength in the Global Exports business).
Foodservice: Reported sales declined 7.8% year over year to $266.7 million. Organic sales tumbled 7.9%, and M&A contributed 0.1% to reported sales. The price/mix improved 3.2%, whereas volumes declined 11.1% on account of the ongoing effects of previously unveiled lost business, along with the current sluggishness in restaurant traffic.
CAG’s Financial Health Snapshot
The company exited the quarter with cash and cash equivalents of $128.7 million, senior long-term debt (excluding current installments) of $7,485.6 million and total stockholders’ equity of $8,695.6 million. In the first quarter of fiscal 2025, Conagra generated $269 million as net cash flows from operating activities, with capital expenditures amounting to $133 million. The company generated a free cash flow of $136 billion in the quarter. During the quarter, Conagra paid dividends worth $167 million.
What to Expect From CAG in FY25?
For fiscal 2025, organic net sales growth is anticipated in the range of 1.5% decline to flat. The adjusted operating margin is expected between 15.6% and 15.8%. Management envisions an adjusted EPS in the range of $2.60-$2.65 in fiscal 2025 compared with $2.67 recorded in fiscal 2024. For fiscal 2025, the net leverage ratio is anticipated to be nearly 3.2. Full-year net inflation (input cost inflation, including the impacts of hedging and other sourcing benefits) is expected to be around 3.2%. Capital expenditure is likely to be around $450 million, interest expenses are expected to be $415 million, and the adjusted effective tax rate is forecasted to be 23.5%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Conagra Brands has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Conagra Brands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Conagra Brands belongs to the Zacks Food - Miscellaneous industry. Another stock from the same industry, United Natural Foods (UNFI - Free Report) , has gained 6.5% over the past month. More than a month has passed since the company reported results for the quarter ended July 2024.
United Natural reported revenues of $8.16 billion in the last reported quarter, representing a year-over-year change of +10%. EPS of $0.01 for the same period compares with -$0.25 a year ago.
For the current quarter, United Natural is expected to post earnings of $0.01 per share, indicating a change of +125% from the year-ago quarter. The Zacks Consensus Estimate has changed -89.6% over the last 30 days.
United Natural has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Conagra Brands (CAG) Down 1.4% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Conagra Brands (CAG - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Conagra Brands due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Conagra Q1 Earnings Lag Estimates, Organic Sales Decline Y/Y
Conagra Brands posted soft first-quarter fiscal 2025 results, wherein the bottom and top lines declined year over year and fell short of the respective Zacks Consensus Estimate. Despite the ongoing difficult landscape, Conagra progressed well on its key priorities. Domestic retail volumes met the company’s expectations, market share expanded across the portfolio, and progress was made on portfolio reshaping initiatives.
CAG’s Quarterly Performance: Key Metrics and Insights
Conagra’s quarterly adjusted earnings per share (EPS) came in at 53 cents, which fell short of the Zacks Consensus Estimate of 59 cents, delivering a negative surprise of -10.2%. The company’s bottom line declined 19.7% year over year.
The company generated net sales of $2,794.9 million, which declined 3.8% year over year and missed the Zacks Consensus Estimate of $2,839 million. The top line included a 0.4% negative impact of currency movements. Organic net sales declined 3.5% year over year due to a 1.6% drop in volumes and a 1.9% adverse effect from price/mix as a result of elevated strategic investments. Results were also affected by temporary manufacturing hurdles in the Hebrew National business during the key grilling season.
The adjusted gross profit declined 9.4% year over year at $726 million. The adjusted gross margin contracted 163 basis points (bps) to 26%. The gross profit was hurt by lower organic net sales, cost of goods sold inflation, adverse operating leverage and the impacts of the abovementioned manufacturing disruptions, partly made up by higher productivity.
Adjusted SG&A expenses, excluding advertising and promotional costs, escalated 7.3% year over year on account of elevated incentive compensation. Adjusted EBITDA (including equity method investment earnings and the pension and post-retirement non-service income) came in at $528 million, down 13.8% year over year.
Decoding CAG’s Segmental Performance
Grocery & Snacks: Quarterly net sales in the segment came in at $1,182.7 million, down 1.7% year over year. Organic sales fell 1.9% due to a 1.8% drop in volumes and a 0.1% dip in price/mix. We had expected segment volumes to drop 1.3%. The company witnessed a 0.2% favorable impact from M&A. During the quarter, CAG saw dollar share gains in snacking categories like microwave popcorn, pudding, pickles and seeds.
Refrigerated & Frozen: Net sales and organic sales declined 5.7% year over year to $1,086.4 million. The price/mix fell 5.8%, with volumes up 0.1%. The company saw dollar share gains in frozen single-serve meals, frozen multi-serve meals and frozen breakfasts.
International: Net sales dropped 0.4% year over year to $259.1 million, reflecting improved organic net sales (up 3%) and negative currency effects (3.4%). Organic sales growth was driven by the price/mix (which climbed 2.4%) and volumes (which rose 0.6% due to strength in the Global Exports business).
Foodservice: Reported sales declined 7.8% year over year to $266.7 million. Organic sales tumbled 7.9%, and M&A contributed 0.1% to reported sales. The price/mix improved 3.2%, whereas volumes declined 11.1% on account of the ongoing effects of previously unveiled lost business, along with the current sluggishness in restaurant traffic.
CAG’s Financial Health Snapshot
The company exited the quarter with cash and cash equivalents of $128.7 million, senior long-term debt (excluding current installments) of $7,485.6 million and total stockholders’ equity of $8,695.6 million. In the first quarter of fiscal 2025, Conagra generated $269 million as net cash flows from operating activities, with capital expenditures amounting to $133 million. The company generated a free cash flow of $136 billion in the quarter. During the quarter, Conagra paid dividends worth $167 million.
What to Expect From CAG in FY25?
For fiscal 2025, organic net sales growth is anticipated in the range of 1.5% decline to flat. The adjusted operating margin is expected between 15.6% and 15.8%. Management envisions an adjusted EPS in the range of $2.60-$2.65 in fiscal 2025 compared with $2.67 recorded in fiscal 2024. For fiscal 2025, the net leverage ratio is anticipated to be nearly 3.2. Full-year net inflation (input cost inflation, including the impacts of hedging and other sourcing benefits) is expected to be around 3.2%. Capital expenditure is likely to be around $450 million, interest expenses are expected to be $415 million, and the adjusted effective tax rate is forecasted to be 23.5%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Conagra Brands has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Conagra Brands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Conagra Brands belongs to the Zacks Food - Miscellaneous industry. Another stock from the same industry, United Natural Foods (UNFI - Free Report) , has gained 6.5% over the past month. More than a month has passed since the company reported results for the quarter ended July 2024.
United Natural reported revenues of $8.16 billion in the last reported quarter, representing a year-over-year change of +10%. EPS of $0.01 for the same period compares with -$0.25 a year ago.
For the current quarter, United Natural is expected to post earnings of $0.01 per share, indicating a change of +125% from the year-ago quarter. The Zacks Consensus Estimate has changed -89.6% over the last 30 days.
United Natural has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.