A month has passed by because the final earnings report for Conagra Manufacturers (CAG). Shares have misplaced about 1.4% in that time-frame, underperforming the S&P 500.
Will the current unfavorable development proceed main as much as its subsequent earnings launch, or is Conagra Manufacturers due for a breakout? Earlier than we dive into how buyers and analysts have reacted as of late, let’s take a fast have a look at its most up-to-date earnings report so as to get a greater deal with on the necessary catalysts.
Conagra Q1 Earnings Lag Estimates, Natural Gross sales Decline Y/Y
Conagra Manufacturers posted comfortable first-quarter fiscal 2025 outcomes, whereby the underside and prime strains declined yr over yr and fell wanting the respective Zacks Consensus Estimate. Regardless of the continuing troublesome panorama, Conagra progressed properly on its key priorities. Home retail volumes met the corporate’s expectations, market share expanded throughout the portfolio, and progress was made on portfolio reshaping initiatives.
CAG’s Quarterly Efficiency: Key Metrics and Insights
Conagra’s quarterly adjusted earnings per share (EPS) got here in at 53 cents, which fell wanting the Zacks Consensus Estimate of 59 cents, delivering a unfavorable shock of -10.2%. The corporate’s backside line declined 19.7% yr over yr.
The corporate generated web gross sales of $2,794.9 million, which declined 3.8% yr over yr and missed the Zacks Consensus Estimate of $2,839 million. The highest line included a 0.4% unfavorable influence of forex actions. Natural web gross sales declined 3.5% yr over yr as a consequence of a 1.6% drop in volumes and a 1.9% hostile impact from value/combine on account of elevated strategic investments. Outcomes had been additionally affected by momentary manufacturing hurdles within the Hebrew Nationwide enterprise throughout the important thing grilling season.
The adjusted gross revenue declined 9.4% yr over yr at $726 million. The adjusted gross margin contracted 163 foundation factors (bps) to 26%. The gross revenue was harm by decrease natural web gross sales, price of products offered inflation, hostile working leverage and the impacts of the abovementioned manufacturing disruptions, partly made up by increased productiveness.
Adjusted SG&A bills, excluding promoting and promotional prices, escalated 7.3% yr over yr on account of elevated incentive compensation. Adjusted EBITDA (together with fairness methodology funding earnings and the pension and post-retirement non-service earnings) got here in at $528 million, down 13.8% yr over yr.
Decoding CAG’s Segmental Efficiency
Grocery & Snacks: Quarterly web gross sales within the section got here in at $1,182.7 million, down 1.7% yr over yr. Natural gross sales fell 1.9% as a consequence of a 1.8% drop in volumes and a 0.1% dip in value/combine. We had anticipated section volumes to drop 1.3%. The corporate witnessed a 0.2% favorable influence from M&A. Throughout the quarter, CAG noticed greenback share beneficial properties in snacking classes like microwave popcorn, pudding, pickles and seeds.
Refrigerated & Frozen: Internet gross sales and natural gross sales declined 5.7% yr over yr to $1,086.4 million. The value/combine fell 5.8%, with volumes up 0.1%. The corporate noticed greenback share beneficial properties in frozen single-serve meals, frozen multi-serve meals and frozen breakfasts.
Worldwide: Internet gross sales dropped 0.4% yr over yr to $259.1 million, reflecting improved natural web gross sales (up 3%) and unfavorable forex results (3.4%). Natural gross sales progress was pushed by the value/combine (which climbed 2.4%) and volumes (which rose 0.6% as a consequence of power within the World Exports enterprise).
Foodservice: Reported gross sales declined 7.8% yr over yr to $266.7 million. Natural gross sales tumbled 7.9%, and M&A contributed 0.1% to reported gross sales. The value/combine improved 3.2%, whereas volumes declined 11.1% on account of the continuing results of beforehand unveiled misplaced enterprise, together with the present sluggishness in restaurant site visitors.
CAG’s Monetary Well being Snapshot
The corporate exited the quarter with money and money equivalents of $128.7 million, senior long-term debt (excluding present installments) of $7,485.6 million and complete stockholders’ fairness of $8,695.6 million. Within the first quarter of fiscal 2025, Conagra generated $269 million as web money flows from working actions, with capital expenditures amounting to $133 million. The corporate generated a free money circulation of $136 billion within the quarter. Throughout the quarter, Conagra paid dividends price $167 million.
What to Count on From CAG in FY25?
For fiscal 2025, natural web gross sales progress is anticipated within the vary of 1.5% decline to flat. The adjusted working margin is predicted between 15.6% and 15.8%. Administration envisions an adjusted EPS within the vary of $2.60-$2.65 in fiscal 2025 in contrast with $2.67 recorded in fiscal 2024. For fiscal 2025, the online leverage ratio is anticipated to be practically 3.2. Full-year web inflation (enter price inflation, together with the impacts of hedging and different sourcing advantages) is predicted to be round 3.2%. Capital expenditure is prone to be round $450 million, curiosity bills are anticipated to be $415 million, and the adjusted efficient tax price is forecasted to be 23.5%.
How Have Estimates Been Transferring Since Then?
It seems, estimates revision have trended downward throughout the previous month.
VGM Scores
At present, Conagra Manufacturers has a pleasant Progress Rating of B, although it’s lagging lots on the Momentum Rating entrance with an F. Nonetheless, the inventory was allotted a grade of A on the worth facet, placing it within the prime quintile for this funding technique.
Total, the inventory has an combination VGM Rating of B. Should you aren’t centered on one technique, this rating is the one try to be concerned with.
Outlook
Estimates have been broadly trending downward for the inventory, and the magnitude of those revisions signifies a downward shift. Notably, Conagra Manufacturers has a Zacks Rank #3 (Maintain). We count on an in-line return from the inventory within the subsequent few months.
Efficiency of an Trade Participant
Conagra Manufacturers belongs to the Zacks Meals – Miscellaneous business. One other inventory from the identical business, United Pure Meals (UNFI), has gained 6.5% over the previous month. Greater than a month has handed because the firm reported outcomes for the quarter ended July 2024.
United Pure reported revenues of $8.16 billion within the final reported quarter, representing a year-over-year change of +10%. EPS of $0.01 for a similar interval compares with -$0.25 a yr in the past.
For the present quarter, United Pure is predicted to publish earnings of $0.01 per share, indicating a change of +125% from the year-ago quarter. The Zacks Consensus Estimate has modified -89.6% during the last 30 days.
United Pure has a Zacks Rank #2 (Purchase) based mostly on the general path and magnitude of estimate revisions. Moreover, the inventory has a VGM Rating of A.
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Free: See Our Top Stock And 4 Runners Up
Conagra Brands (CAG) : Free Stock Analysis Report
United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
