Conagra Brands 3Q Revenues And Profits Beat Estimates; Street Says Hold

Conagra Brands reported strong revenues and profits in the fiscal third quarter. Adjusted earnings per share of $0.59 came in ahead of consensus estimates of $0.58 per share while revenues increased 8.5% year-on-year to $2.8 billion, beating consensus estimates of $2.72 billion.

Conagra Brands’ (CAG) President and CEO, Sean Connolly said, “We have made significant investments in our business over the past five-plus years, modernizing our products to generate consumer demand. Our strong third-quarter results benefited from these investments. We continued to invest in the business during the quarter, with a focus on ensuring our products are available both online and in stores, as we aim to maximize consumer acquisition during this period of heightened demand.”

The company’s grocery and snacks segment and refrigerated and frozen business saw year-on-year growth of 10.8% and 11.7% in the third quarter, respectively. Conagra bought back 8.8 million shares for $298 million.

The company also provided guidance for the fourth quarter and expects organic net sales to decline by 10% to 12% year-on-year while adjusted operating margin is expected to be between 14% to 15%. Conagra foresees adjusted EPS to land between $0.49 to $0.55. The company also completed the divestiture of its Peter Pan peanut butter business in 3Q which is expected to reduce annual net sales by around $110 million and adjusted EPS by $0.03. (See Conagra Brands stock analysis on TipRanks)

The company also reaffirmed guidance for FY22 and expects adjusted EPS of $2.63 to $2.73.

Following the results, Jeffries analyst Robert Dickerson reiterated a Buy and a price target of $40 on the stock. Dickerson said in a note to investors, “CAG Q3 EPS of $0.59, slightly ahead of cons. $0.58, driven by below-the-line items. Org. sales growth beat (+9.7% vs. +7.3%), although gross and op. margins missed, albeit at the low end of mgmt’s Q3 guide.”

“FY’22 guidance reaffirmed with 8.8mm shares repo’d in Q3, which could add $0.05 to FY’22 EPS. Q4 guide above cons. sales, but below on implied op. profit at margin guide midpoint, driven by cost inflation. Question now on margin progression in FY’22,” Dickerson added.

Overall, the rest of the Street is sidelined on the stock with a Hold consensus rating based on 1 Buy, 1 Hold, and 1 Sell. The average analyst price target of $37 implies that CAG shares are currently fully priced.