Why Conagra’s EPS could grow
Conagra Brands (CAG) impressed investors with its stellar EPS (earnings per share) growth in fiscal 2017.[1. fiscal 2017 ended May 2017] The company’s adjusted EPS from continuing operations jumped 33.8%, driven by higher cost savings and productivity savings. Analysts expect the company to report higher EPS despite sales deleverage.
Analysts expect Conagra Brands’ (CAG) bottom line to rise 8.0% in fiscal 2018. Conagra’s EPS is projected to grow 8.5% in fiscal 2019. Cost-cutting initiatives, higher pricing, improved mix, and lower SG&A[1. selling, general, and administrative] spending could drive the company’s EPS growth in the next few quarters.
However, soft volumes, increased input costs, a tough retail environment, and increased investments to support new product launches could weigh on the company’s profitability.
Sales to remain muted
Conagra’s (CAG) sales are showing signs of improvement, thanks to its strategic acquisitions and new product launches. However, its top line is expected to fall in the next few quarters. This decline reflects low demand for packaged foods in the US (SPY) and Conagra’s focus shift to portfolio optimization through shedding low-margin businesses.
A challenging retail landscape is further expected to dent the growth rate of CAG’s top line. However, the company’s improved pricing, favorable mix, and acquisition of BIGS, Duke’s, and Frontera brands are projected to supplement the company’s sales growth rate in going forward.