Conagra Brands (CAG 39.87, -0.61) is down 1.5% in pre-market despite beating earnings expectations.
The food producer and distributor reported above-consensus third quarter earnings of $0.48 per share on revenue of $1.98 billion, which declined 9.9% year-over-year, but still matched market expectations.
When excluding the impact of divestitures and foreign exchange, net sales fell 4.8% due to volume declines associated with Conagra's plan to improve the quality of its revenue base.
The company's effort to strengthen its revenue boosted gross margin by 180 basis points to 31.6%. Input cost favorability, supply chain productivity, improved pricing, and the impact of divesting lower margin businesses drove the improvement, offsetting a decline in volume, unfavorable mix, and the negative impact from foreign exchange.
Grocery & Snacks net sales fell 5.0% to $850.00 million. Volume also declined 5.0% due to a reduction in promotional intensity and the planned exit of lower-performing products. Price/mix was little changed year-over-year. Segment operating profit grew 31.6% to $201.90 million. Discipline on pricing and trade promotion, favorable input costs, supply chain productivity, and benefits of cost control efforts outweighed a decline in net sales.
Refrigerated & Frozen net sales dropped 6.0% to $666.00 million. Volume also fell 6.0% due to ongoing efforts to upgrade the quality of revenue base through pricing optimization and improvement in trade promotion productivity. Price/mix was flat year-over-year. Segment operating profit increased 10.4% to $128.90 million, as lower sales were more than offset by favorable input costs, supply chain productivity, and cost savings.
International net sales fell 3.0% to $205.00 million. Volume declined 4.0% while price/mix increased 3.0%. Segment operating profit rose 10.4% to $18.10 million.
Foodservice net sales also fell 3.0%, declining to $260.00 million. Volume fell 6.0% while price/mix increased 3.0%. Segment operating profit ticked down 0.4% year-over-year to $27.80 million.
Total operating profit increased 16.0% to $376.50 million.
Conagra commented on its expectations for the remainder of the fiscal year, expecting to report earnings on the high end of its guidance range of $1.65 to $1.70 per share. Net sales are expected to be down between 4.0% and 5.0%. Adjusted gross margin is expected between 30.4% and 30.6%.