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Could Conagra Brands Exceed Earnings Estimates?

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Dec. 4 2020, Updated 10:52 a.m. ET

Consensus estimate

Conagra Brands (CAG) is expected to announce its fiscal 2Q18 earnings on Thursday, December 21, 2017. Analysts expect the company to continue to report higher EPS (earnings per share) despite the headwinds to its margins. Analysts expect the company to post adjusted earnings of $0.52 per share, up 6.1% on a YoY (year-over-year) basis.

In comparison, analysts estimate General Mills (GIS) to disappoint on earnings in fiscal 2Q18. Weak volumes and rising input costs are expected to take a toll on the company’s bottom line, which analysts project will see a YoY decline.

Food manufacturers in the US (SPY) are seeing soft demand for their products. Meanwhile, inflation in commodity prices, higher packaging and logistics costs, and price competition among retailers are squeezing the margins of these companies.

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For instance, during the last reported quarter, Campbell Soup’s bottom line fell 8% YoY, reflecting soft volumes and increased input costs. Plus, J.M. Smucker’s (SJM) earnings fell 1.5% YoY, reflecting inflation in commodity prices. However, Kellogg (K), Mondelēz International (MDLZ), and Hershey (HSY) reported an improved bottom-line performance despite pressure on margins thanks to increased cost and productivity savings.

Outlook

Conagra Brands’ EPS is likely to benefit from its focus on portfolio optimization and cost-cutting efforts. The company expects its adjusted earnings from continuing operations to be $1.84 to $1.89 in fiscal 2018. This compares favorably to its adjusted EPS of $1.74 in fiscal 2017.

However, the company’s fiscal 1H18 EPS is projected to take a hit due to increased input costs. Moreover, higher slotting investments to support new products could further pressure the EPS growth rate.

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