Conagra Brands Q3 earnings dip 33% but beats estimates

Conagra Brands (CAG) reported a 33% dip in earnings for the third quarter due to higher costs and expenses as well as income tax expense. The bottom line exceeded analysts’ expectations while the top line missed consensus estimates. Further, the packaged food company maintained its 2019 adjusted earnings guidance. Following this, the stock inched up over 3% in the premarket session.

Net income attributable to the company plunged 33.3% to $242 million and earnings plummet 44.4% to $0.50 per share. Adjusted earnings decreased 16.4% to $0.51 per share, due to an increase in share count.

Net sales soared 35.7% to $2.71 billion. The growth reflected a 34.3 percentage point net benefit from the acquisitions of Pinnacle Foods and Sandwich Bros. of Wisconsin, the divestiture of the Canadian Del Monte business, and the sale of Trenton. It also includes a 0.5 percentage point decrease from foreign exchange and a 1.9 percentage point of growth in organic net sales, excluding the sale of the Trenton, Missouri production facility.

Looking ahead into fiscal 2019, the company narrowed its Pinnacle net sales outlook to the range of $1.71 billion to $1.73 billion from the prior estimate of $1.70 billion to $1.75 billion. Total company adjusted earnings from continuing operations are still anticipated to be in the range of $2.03 to $2.08 per share. Total company organic net sales growth excluding Trenton impact is now expected to be about 1% compared to the previous forecast range of 1% to 2%.

For the third quarter, sales for the Grocery & Snacks segment increased 2.9% helped by continued strong performance in the Legacy Conagra snacks business. Volume increased 2.1% behind the strong growth in snacks, and price/mix increased 0.8% in the period as favorable pricing and mix more than offset increased brand building investments with retailers.

The Refrigerated & Frozen segment continued its positive momentum in the third quarter, with net sales growth of 3.3% and organic net sales growth of 2.4%, driven by innovation. Volume grew 3.5% behind strong growth across the frozen portfolio, including the Marie Callender’s, Healthy Choice, Banquet, P.F. Chang’s, and Frontera brands. Price/mix decreased by 1.1% due to higher brand building investments with retailers.

Sales for the International segment fell by 11.4%. The sale of the Canadian Del Monte business reduced the net sales growth rate by about 640 basis points, and the impact of foreign exchange unfavorably impacted the net sales growth rate by 415 basis points. Sales for the Foodservice segment decreased by 8.7% as the sale of the Trenton facility reduced the net sales growth rate by 810 basis points.

Also read: Darden Restaurants reports upbeat Q3 earnings

Net sales for the Pinnacle segment totaled $712 million in the period, which reflects a mid-single-digit percentage point decline versus the comparable year-ago period on a pro forma basis. Consumption growth in brands including Vlasic, Armour, and Gardein was more than offset by declines in brands including Birds Eye, Wish-Bone, and Duncan Hines.

Following the conclusion of the third quarter, on February 25, 2019, the company completed the divestiture of the Wesson oil brand, selling all assets exclusively related to the business, including a facility in Memphis, Tennessee. The company used the net proceeds from the transaction to pay down debt in the fourth quarter.

Shares of Conagra ended Wednesday’s regular session up 0.39% at $22.90 on the NYSE. The stock has fallen over 37% in the past year and over 5% in the past three months.

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