Conagra (CAG) Q2 Earnings Top Estimates, FY18 View Solid

North American food company Conagra Brands, Inc. (NYSE:CAG) reported better-than-expected second-quarter fiscal 2018 (November 2017) results.

Earnings

In the fiscal second quarter, Conagra’s quarterly adjusted earnings from continuing operations came in at 55 cents, surpassing the Zacks Consensus Estimate of 52 cents. The bottom line also came in 12.2% higher than the year-ago tally.

Revenues

Conagra generated net revenues of $2,173.4 million in the reported quarter, beating the Zacks Consensus Estimate of $2,070 million. In addition, the top line came in 4.1% higher than the prior-year figure.

Segmental Details

Grocery & Snacks: The segment’s quarterly sales came in at $900.4 million, up 5.5% year over year.

Refrigerated & Frozen: Quarterly revenues were up 2.3% year over year to $758.1 million.

International: Sales of the segment came in at $220.3 million, up 4.2% year over year.

Foodservice: The segment’s quarterly revenues were $294.6 million, up 4.1% year over year.

Conagra Brands Inc. Price, Consensus and EPS Surprise

Conagra Brands Inc. Price, Consensus and EPS Surprise | Conagra Brands Inc. Quote

Other Financial Fundamentals

Conagra’s cost of goods sold inched up 0.3% year over year to $2,800.3 million. Selling, general and administrative (SG&A) expenses dropped 15.9% year over year to $546.3 million. Interest expenses plunged 33.8% to $74.4 million due to lower debt levels. Adjusted gross profit contracted 100 basis points (bps) to 30.1% during the reported quarter.

Conagra exited the fiscal second quarter with cash and cash equivalents of $84 million, significantly lower than $251.4 million recorded at the end of fiscal 2017. Senior long-term debt (excluding current portion) came in at $3,065.9 million, up from $2,573.3 million reported as of May 28, 2017.

In the first half of fiscal 2018, Conagra generated net cash of $399 million from its operating activities, down from $542.2 million recorded in the year-ago period. Capital spent on additions of property, plant and equipment totaled $101.7 million, down 14% year over year.

During the fiscal second quarter, Conagra repurchased nearly 8 million common stock against $280 million.

Outlook

Conagra is poised to grow on the back of elevated sales, greater innovation and efficient operations. This Zacks Rank #2 (Buy) companmy anticipates to accrue earnings near the higher end of the prior guidance range of $1.84-$1.89 per share for fiscal 2018. However, the company expects to experience input cost inflation of roughly 3.7% for fiscal 2018.

Other Stocks to Consider

Some other top-ranked stocks in the industry are listed below:

Pilgrim's Pride Corporation (NASDAQ:PPC) currently sports a Zacks Rank of 1 (Strong Buy). The company has pulled off an average positive earnings surprise of 1.53% in the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flowers Foods, Inc. (NYSE:FLO) has a Zacks Rank of 2. The company generated an average positive earnings surprise of 2.79% over the trailing four quarters.

Lamb Weston Holdings Inc. (NYSE:LW) also holds a Zacks Rank of 2. The company recorded an average positive earnings surprise of 11.02% during the same time frame.

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