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Conagra’s 3Q18 Earnings Could See Double-Digit Growth

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Analysts’ expectations

Conagra Brands (CAG) is expected to announce its fiscal 3Q18 results on March 22, 2018. Analysts expect Conagra Brands to report an adjusted EPS (earnings per share) of $0.55—up 14.6% on a YoY (year-over-year) basis.

Notably, Conagra Brands has managed to report double-digit EPS growth in the past several quarters due to its focus on cost and productivity savings. In comparison, analysts expect General Mills (GIS) to also report healthy bottom-line growth in fiscal 3Q18. General Mills is expected to report its fiscal 3Q18 earnings on March 21.

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What could support Conagra’s bottom line?

Conagra Brands’ fiscal 3Q18 EPS is expected to benefit from improved sales. Meanwhile, higher pricing, a favorable mix, and supply-chain productivity savings should also support its bottom line. A decline in interest expenses and lower outstanding shares are expected to boost Conagra’s EPS growth rate.

Inflation in commodity prices, brand investments including marketing and slotting fees, and an expected increase in transportation costs are expected to remain a drag and restrict the bottom-line growth rate.

Food manufacturers’ bottom lines are taking a hit due to soft volumes and higher manufacturing and logistics costs, driven by weak demand, inflation in commodity prices, and higher transportation costs. Hershey (HSY) and Kraft Heinz (KHC) posted a YoY decline in their EPS during the last reported quarter.

Cost pressure and industry-wide soft demand for packaged food pressured Kellogg (K), Mondelez (MDLZ), and J.M. Smucker (SJM). However, increased cost savings and an improved mix more than offset the negatives.

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