uploads///ConAgra Foods Actual Revenue versus Estimates

Can ConAgra Foods Revive its Revenue Growth in 4Q16?

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Jun. 27 2016, Updated 8:07 a.m. ET

Revenue expectations for 4Q16

Analysts expect ConAgra Foods’ (CAG) revenue to be $2.8 billion for fiscal 4Q16. This represents a decrease of 29%—compared to its 4Q15 revenues of $4.1 billion. The company missed estimates in the first two quarters of fiscal 2016. It beat estimates in the third quarter by 2%.

For fiscal 2016, analysts expect the revenue to fall by 26% to $11.7 billion—compared to $15.8 billion in fiscal 2015. The revenue is projected to bounce back slowly in fiscal 2017. The company hopes to benefit and boost sales from product innovation and enhancing its product portfolio. Analysts expect that the company’s 2017 and 2018 revenues will remain at $11.81 billion and $11.98 billion, respectively.

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Revenue contributors

ConAgra Foods (CAG) earns its revenue and operates through two segments—Consumer Food and Commercial Food segment. ConAgra derives ~60%–65% of its revenue from the Consumer Foods segment. This segment sells branded food items worldwide through retail channels.

The next largest share comes from the Commercial Food segment which forms 30%–35% of the company’s revenues. This segment sells specialty potato, seasonings, blends, flavors, and bakery products, as well as consumer branded and private label packaged food items to restaurants, foodservice, and commercial channels worldwide.

Benefit from product innovation

The company aims to take advantage of segment sales from organic innovations and smart acquisitions in its product portfolio. Peter Pan Simply Ground Peanut Butter, introduced in 2Q16, is expected to boost sales. The company is also investing in innovation in its Healthy Choice Simply Steamers line.

It’s introducing four new premium varieties that include three-cheese tortellini, a sweet and spicy Asian-style noodle bowl, creamy spinach and tomato linguine, and an unwrapped burrito bowl in 4Q16. It’s also going ahead with major renovation investments in the Bertolli brand to drive profitable growth. Management thinks that stronger brands will lead to better pricing power and higher margins in the future.

Revenue estimates for peers

ConAgra’s peers in the packaged food industry include Campbell Soup (CPB), McCormick & Company (MKC), and Snyder’s Lance (LNCE).

  • Campbell Soup’s revenues for fiscal 4Q16 are expected to grow by 1%.
  • McCormick & Company’s revenues for fiscal 2Q16 are projected to increase by 4%.
  • Snyder’s Lance’s revenues for fiscal 2Q16 are expected to increase by 43%.

To gain exposure to all of these stocks, you can invest in ETFs such as the PowerShares Dynamic Food and Beverage (PBJ). PBJ invests ~11% in all of these stocks as of June 23.

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