Shares of Conagra (CAG) -12% are trading at a three-month low after the company missed fourth quarter estimates on the top and bottom lines this morning.
The consumer-packaged foods company missed sales estimates every quarter in fiscal 2019. Conagra continues to struggle with consumer preferences shifting toward healthier, fresh, and sustainable foods.
Fourth quarter sales grew 33% due to the Pinnacle acquisition, but organic sales fell 0.7%, driven by a 1.2% decline in volume.
The company missed its sales guidance by 2.4%. Management cited intensified promotional competition for the Chef Boyardee, Hunt's, and Marie Callender's brands. The company also dealt with some manufacturing and co-packing challenges during the quarter.
After spinning off Lamb Weston (LW) in 2016, the company announced the acquisition of Pinnacle Foods for $11 bln exactly one year ago today. The Pinnacle acquisition integration is progressing well, but that deal largely doubled down on legacy frozen, refrigerated, and snack food brands that are struggling to post significant growth due to the aforementioned shift in consumer preferences. Organic sales grew just 0.3% in fiscal 2019.
General Mills (GIS) missed sales estimates yesterday while Kraft Heinz (KHC) continues to struggle with similar challenges.
Conagra is trying to offer more on-trend products, but its Gardein plant-based protein brand has flown under the radar relative to the Beyond Meat (BYND) phenomenon.
The company tweaked fiscal 2020 EPS guidance lower due to the Gelit divestiture but actually raised fiscal 2020 organic sales growth guidance to +1.0-1.5% from +1.0%.
Conagra reaffirmed guidance for organic sales growing 1-2% over the next three years, targeting EPS of $2.68-2.78 in fiscal 2022. Management is also targeting a reduction in leverage to 3.5-3.6x net debt to EBITDA versus the current $10.4 in net debt load.
With today's decline, the stock trades at just under 11x EV/EBITDA estimates, which is a discount to the average consumer packaged goods company closer to 14x.