Conagra Beat Fiscal 1Q18 Earnings Estimates
EPS jumped ~18%
Conagra Brands (CAG) reported better-than-expected earnings on September 28, 2017. The company’s adjusted EPS (earnings per share) from continuing operations of $0.46 exceeded analysts’ estimate of $0.40 and jumped 17.9% on a YoY (year-over-year) basis. Increased cost savings and higher productivity drove the company’s strong EPS growth.
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Factors driving Conagra’s bottom line
Conagra’s fiscal 1Q18 EPS benefitted from its productivity and cost-reduction initiatives, which more than offset the negatives of sales deleverage. During the reported quarter, the company managed to lower its costs by reducing SG&A (selling, general, and administrative) costs. Meanwhile, higher pricing and mix, trade efficiency, and share repurchases further supported the bottom-line growth.
Also, lower interest expenses and increased earnings from Ardent Mills supplemented the company’s profitability. However, lower volumes, a higher-than-expected rise input costs, unfavorable currency movement, and increased investments in slotting fees to support innovation-led product launches adversely affected its margins and in turn, its bottom line.
In comparison, General Mills (GIS), which reported its fiscal 1Q18 results on September 20, 2017, missed analyst estimates, as its EPS plunged 9.0% YoY, reflecting lower volumes and higher costs. Meanwhile, J.M. Smucker (SJM) also marked a YoY decline in its bottom line during the last reported quarter.
However, Kraft Heinz (KHC) and Kellogg (K) have managed to improve their profitability despite lower sales thanks to incremental cost and productivity savings.
The company stood by its earlier guidance and expects adjusted EPS from continuing operations to be in the range of $1.84 to $1.89 in fiscal 2018. However, the first-half bottom line results will likely be negatively impacted by inflation in input costs. Meanwhile, lower volumes and higher slotting fees will further pressure the profitability growth rate.