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Shares of Conagra Brands Inc. (NYSE: CAG ) rose over 2% on Friday, following a strong earnings report from the company. The packaged goods provider beat expectations on revenue and earnings for the second quarter of 2023 and raised guidance for the full year. The stock has gained 18% over the past 12 months.
Quarterly performance
Conagra reported net sales of $3.31 billion for the second quarter of 2023, which was an 8.3% increase from the same period a year ago and ahead of estimates of $3.30 billion. Adjusted EPS increased 28% to $0.81, beating the consensus target of $0.66.
Trends
During the second quarter, organic sales rose 8.6%, driven by price increases introduced by the company to combat inflation. This was partially offset by an 8.4% decline in volume due to the impact of elasticity from price action.
Conagra reported sales increases in all segments, barring International, which was hurt by FX headwinds. Sales growth was driven by price increases but the elasticity impact of these increases led to volume declines across all divisions.
During the second quarter, Conagra’s retail sales increased 10.6% compared to the year-ago period. The company is gaining share in snacking categories like meat snacks and microwave popcorn, as well as in staples categories like canned meat. Microwave popcorn sales increased 21% compared to the year-ago quarter, while meat snacks saw sales increase nearly 15%.
Conagra also gained share in categories like frozen single-serve meals, plant-based protein, and frozen breakfasts. In Q2, single-serving meal sales increased 10.2% compared to a year ago, while vegetable protein sales increased 5.6%. Breakfast sausage sales are up nearly 27%.
In Q2, Conagra’s gross profit rose 22% to $922 million, benefiting from organic sales growth and productivity that helped offset cost-of-goods inflation. Gross margin increased 316 basis points to 27.8%.
Outlook
Based on business momentum and strong performance in the first half of the fiscal year, Conagra raised guidance for all key metrics. For FY2023, the company now expects organic net sales growth of 7-8% versus previous guidance of 4-5% growth.
Adjusted EPS is expected to be $2.60-2.70, which represents year-over-year growth of 10-14%. This compares to prior expectations of adjusted EPS growth of 1-5%. Adjusted operating margin is now estimated to be between 15.3-15.6% compared to the previous outlook of approx. 15%.
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