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ConAgra (CAG) Posts In-Line Q4 Earnings, Gives FY18 EPS View

North American food company, Conagra Brands, Inc. CAG, reported in-line earnings for fourth-quarter fiscal 2017 (ended May 31, 2017).

Earnings

In the fiscal fourth quarter, Conagra’s quarterly earnings from continuing operations came in at 37 cents, in line with the Zacks Consensus Estimate.

 

However, the bottom line came in 15.6% higher than the year-ago tally. The company noted that the year-over-year upside was stemmed by lower interest expense, and reduced selling, general and administrative costs.

Adjusted earnings from continuing operations in fiscal 2017 came in at $1.74 per share compared to $1.30 per share reported in the year-ago period.

Revenues

Conagra generated net revenue of $1,861.7 million in the reported quarter, down 9.3% year over year. However, the top line surpassed the Zacks Consensus Estimate of $1,859 million.

Revenues for fiscal 2017 came in at $7,826.9 million, down 9.7% year over year.

The dismal top-line performance came due to the lower volumes accrued from the company’s initiatives to create an improved quality revenue base.

Segmental Details

Grocery & Snacks: The segment’s quarterly sales were $749.4 million, down 3% year over year.

Refrigerated & Frozen: Quarterly revenues declined 5.1% year over year to $640.2 million.

International: Sales of the segment came in at $204.7 million, down 1.3% year over year.

Foodservice: The segment’s quarterly revenues were $267.4 million, down 5.3% year over year.

Commercial: The company did not generate sales from this segment during the quarter. The segment used to include sales generated from the J.W. Swank and Spicetec Flavors & Seasonings businesses. Conagra divested both the businesses in Jul 2016.

Other Financial Fundamentals

Conagra’s cost of goods sold dropped 9.5% year over year to $1,332.7 million. Selling, general and administrative (SG&A) expenses plunged 42.9% year over year to $417.8 million. Interest expenses plummeted 37.6% to $37.5 million due to lower debt levels.

Adjusted gross profit expanded 130 basis points (bps) to 29% during the quarter. Adjusted gross margin for fiscal 2017 came in at 30.2%, expanding 180 basis points year over year. The company mentioned that its margins improved on the back of robust supply chain productivity, improved price/mix and divestiture of low-margin businesses.

Conagra exited the fiscal fourth quarter with cash and cash equivalents of $251.4 million, lower than $798.1 million recorded at the end of fiscal 2016. Senior long-term debt (excluding current portion) was $2,573.3 million, down from $4,685.5 million as of May 29, 2016.

In fiscal 2017, Conagra generated net cash of $1,175.5 million from its operating activities, down from $1,259.2 million recorded in the year-ago period. Capital spent on additions of property, plant and equipment totaled $242.1 million, down 12.8% year over year.

During the reported quarter, the company repurchased 10 million shares of common stock with an amount of $405 million.

Outlook

Conagra anticipates to report adjusted earnings from continuing operations within the range of $1.84–$1.89 per share for fiscal 2018. This Zacks Rank #3 (Hold) company plans to buyback roughly $1.1 billion worth shares of its common stock in fiscal 2018.

Stocks to Consider

Some better-ranked stocks within the industry are listed below:

Aramark ARMK generated an average positive earnings surprise of 4.45% over the trailing four quarters and currently carries a Zacks Rank #2 (Buy). You can seesee the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

B&G Foods, Inc. BGS, which also has a Zacks Rank #2 at present, pulled off an average positive earnings surprise of 1.95% over the last four quarters.

Church & Dwight Company, Inc. CHD currently holds a Zacks Rank #2 and has an average positive earnings surprise of 6.33% for the last four quarters.

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ConAgra Foods Inc. (CAG): Free Stock Analysis Report
 
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