ConAgra (CAG 25.76, -3.33, -11.43%) has slumped to a level not seen
in four years after the company released a mixed quarterly report and guidance.
The manufacturer and distributor of packaged food reported above-consensus second quarter earnings of $0.67 per share on a 9.7% year/year increase in revenue to $2.38 bln, which was shy of expectations.
ConAgra's guidance for fiscal 2019 was also mixed relative to expectations, as the company shared an outlook for below-consensus earnings between $2.03 per share and $2.08 per share while revenue is expected between $9.69 bln and $9.74 bln, which is close to market expectations.
The entirety of ConAgra's revenue growth was owed to acquisitions of Pinnacle, Angie's BOOMCHICKAPOP, and Sandwich Bros of Wisconsin, which added 13.2 percentage points to the net revenue growth rate. The growth was partially offset by a 1.5 percentage point decrease from the sale of the Del Monte business in Canada and the sale of a facility in Trenton. Unfavorable foreign exchange rates removed another 0.4 percentage points from the net sales growth rate.
On an organic basis, sales declined 1.6% year/year, which was largely in-line with the company's internal expectations.
Even with the decline in organic sales, the company was able to realize gross profit growth. On an adjusted basis, gross profit rose 7.6% to $704 mln. The increase resulted from the addition of Pinnacle's gross profit and improved pricing in the company’s legacy business. These factors outweighed higher transportation and input costs as well as increased retailer marketing costs for the legacy business.
Looking at the segment breakdown, Grocery & Snacks sales were little changed year/year at $900 mln while organic net sales fell 1.9%. Volume fell 2.2% while price/mix increased 0.3%. Adjusted segment operating profit was little changed at $211 mln.
Refrigerated & Frozen segment sales grew 1.7% to $771 mln while organic sales increased 0.5%. Volume increased 0.5% while price/mix was little changed year-over-year. Adjusted segment operating profit grew 7.7% to $138 mln.
International segment sales declined 5.4% to $208 mln while organic net sales grew 3.9%. The decline in net sales was owed to the company’s sale of the Canadian Del Monte business. Volume increased 0.6% while price/mix grew 3.3%. Adjusted segment operating profit grew 18.1% to $25 mln.
Foodservice net sales fell 16.5% to $246 mln while organic sales, excluding Trenton, declined 10.4%. The contraction in net sales was driven by the sale of the Trenton facility and the impact of hurricanes that took place one year ago. Volume fell 12.9% while price/mix increased 2.5%. Segment operating profit fell 31.2% to $32.70 mln.
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