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Will Conagra Stock Benefit from Fiscal 2Q18 Earnings?

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What analysts expect

Conagra Brands (CAG) is set to announce its fiscal 2Q18 results on December 21, 2017. Analysts expect Conagra’s sales to show sequential improvement driven by higher pricing and new products. Moreover, recently acquired brands are expected to generate incremental sales. However, analysts expect the company’s sales to fall on a YoY (year-over-year) basis as weak consumption and brand divestitures are expected to remain a drag. Meanwhile, increased slotting investments could further restrict the company’s top-line growth rate.

Meanwhile, analysts expect Conagra’s bottom line to improve on a YoY basis, reflecting increased cost savings and higher pricing. However, inflation in input costs, weak volumes, and increased slotting investments are expected to restrict the bottom-line growth rate.

Recovering stock prices

Stock prices of packaged food manufacturers in the US (SPY) have taken a beating from weak consumer demand. Besides, a tough retail landscape, increased competition, and inflation in input costs further weighed on the financials of these companies and kept investors at bay.

However, food manufacturers are showing signs of revival, driven by innovative product launches, a focus on cost savings, and favorable currency rates, which is evident in their recovering stock prices.

As for Conagra Brands, the company’s stock has fallen 6.4% on a YTD basis. Meanwhile, Campbell Soup (CPB), General Mills (GIS), Kellogg (K), and J.M. Smucker (SJM) have fallen 19.7%, 9.1%, 11.7%, and 7.4%, respectively.

In comparison, the S&P 500 (SPX) is up 18.5% on a YTD basis.

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