Earnings preview: Conagra Brands likely to post upbeat Q2 results

Conagra Brands (CAG) is set to report its second-quarter results on Thursday before the market opens. The packaged food company is expected to be benefited from the acquisitions of Pinnacle Foods, Angie’s Boomchickapop and Sandwich Bros. of Wisconsin. The results could be pressurized by the sale of certain businesses.

Analysts, on an average, expect Conagra to post earnings of $0.56 per share on revenue of $2.41 billion for the second quarter. In comparison, during the previous year quarter, the company reported a profit of $0.55 per share on revenue of $2.17 billion. Majority of the analysts recommended a “strong buy” or “buy” rating on the stock with an average price target of $39.92.

The quarter could be positively impacted by favorable price/mix, strong supply chain realized productivity and recent acquisitions. The acquisitions of Angie’s Boomchickapop and Sandwich Bros. of Wisconsin could benefit the results while the sale of the Missouri production facility and the Canadian Del Monte business could hinder the growth.

Volume could rise for the second quarter helped by the growth in the Refrigerated & Frozen, Grocery & Snacks, and International segments. Price/mix is expected to be favorable for the company driven by improved pricing and mix. The company will face higher retailer investments that will drive brand saliency, enhanced distribution, and consumer trial.

Conagra shares crash after company misses estimates, guides lower

For the first quarter, Conagra posted a 17% jump in earnings helped by higher sales as well as lower costs and expenses. Net sales rose by 1.7% helped by the recent acquisitions. Organic net sales, excluding the sale of the Trenton, Missouri production facility, rose 1.2%. Conagra posted sales increases across all its segments, barring Foodservice which saw a decline of 6.9%.

For the second quarter, the company projected organic net sales growth to be in the range of flat to slightly down versus the prior-year period. Net sales growth was predicted to be about 40 basis points lower than the organic net sales growth rate, excluding Trenton. Adjusted EPS was anticipated to be in the range of $0.57 to $0.60.

For the fiscal year 2019, the company has expected sales growth in the range of 0.5% to 1.5% and organic sales growth, excluding Trenton, in the range of 1% to 2%. Meanwhile, adjusted gross margin was predicted to be in the range of 29.7% to 30%.

Shares of Conagra opened higher on Tuesday and is trading in the green territory in the mid-afternoon. The stock has plunged over 23% in the year so far and over 24% in the past three months.

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