Revisiting its financials
Conagra Brands (CAG) will report its fiscal 1Q18 sales and earnings results on Thursday, September 28. Analysts expect the company to continue to see declining sales, as lower volumes partly due to the sluggish demand and brand divestitures are likely to remain a drag. However, the company’s margins and EPS are expected to grow as the company’s efforts to reduce costs and drive efficiency are projected to offset the negatives stemming from volume deleverage.
However, the company’s margin expansion rate is anticipated to slow down, reflecting the company’s investments in growth opportunities, rising input costs, increased competitive activity, and lower sales, which in turn could restrict Conagra stock’s upside in fiscal 2018.
YTD stock performance
Food stocks have underperformed the S&P 500 (SPX-INDEX) significantly on a YTD (year-to-date) basis. A continued decline in sales and challenges ahead makes investors cautious about the prospects of the companies operating in this segment. Moreover, J.M. Smucker (SJM) and General Mills’ (GIS) recent quarterly results further jeopardized investors’ confidence in this sector and dashed the hopes of recovery for food stocks.
As for Conagra Brands, the company’s stock is down 16.2% on a YTD basis as of September 22, 2017. During the same period, the S&P 500 generated a return of 11.8%.