Conagra (CAG) reported earnings on Thur 20 Dec 18 (b/o)

** charts after earnings **

 

Conagra beats by $0.11, misses on revs; guides FY19 EPS below consensus, reaffirms FY19 revs guidance

• Reports Q2 (Nov) earnings of $0.67 per share, excluding non-recurring items, $0.11 better than the S&P Capital IQ Consensus of $0.56; revenues rose 9.7% year/year to $2.38 bln vs the $2.41 bln S&P Capital IQ Consensus.
  • Adjusted gross profit increased 7.6% to $704 million or 29.5% of net sales. The addition of Pinnacle's gross profit, together with supply chain realized productivity and improved pricing in the Legacy Conagra business, more than offset higher transportation and input costs and the previously-mentioned increases in retailer marketing for the Legacy Conagra business.
  • For the 31 days between the Pinnacle acquisition closing date and the quarter end, net sales for the Pinnacle segment totaled $259 million. Net sales were below expectations due to weak performance across a range of significant brands, as well as the impact of a product recall on Duncan Hines.
  • Net sales for the Grocery & Snacks segment were relatively flat at $900 million in the quarter, and organic net sales declined 1.9%.
  • Net sales for the Refrigerated & Frozen segment increased 1.7% to $771 million in the quarter, and organic net sales grew 0.5%.
• Co issues guidance for FY19, sees EPS of $2.03-2.08, excluding non-recurring items, vs. $2.12 S&P Capital IQ Consensus; sees FY19 revs growth of 22-23% (implying $9.685-9.764 bln) vs. $9.74 bln S&P Capital IQ Consensus.
• Co states, "Additionally, we expect to over-deliver on our cost synergy target. While we are starting from a lower base in fiscal 2019, we expect to deliver strong EPS growth off that base and hit the fiscal 2022 EPS target that drove our original EPS accretion guidance for this transaction, and we remain committed to our previously-communicated leverage target. We look forward to providing a more comprehensive update at our Investor Day."

The following day

Today, Conagra Brands (CAG) shares were down 8%, after dropping nearly 17% Thursday. Conagra closed on its $10.7 billion acquisition of Pinnacle Foods in the fourth quarter, and management gave disappointing guidance when they reported earnings Thursday.