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Conagra Crushes Fiscal Q4 2018 Estimates, Sees Stellar EPS Growth

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Key takeaways

Conagra Brands (CAG) reported stronger-than-expected fiscal fourth-quarter results today. The quarter ended on May 27. The company’s net sales of $2.0 billion came in ahead of analysts’ expectation of $1.9 billion and increased 5.6% YoY (year-over-year). Continued strength in the Refrigerated & Frozen segment and reacceleration in the Grocery & Snacks division drove the company’s top-line growth.

The company’s acquired brands, including Angie’s BOOMCHICKAPOP, Duke’s, and BIGS continued to generate strong sales and contributed 330 basis points to the net sales growth rate. Meanwhile, innovation and higher net price realization drove the organic sales growth rate, which increased 2.0%. Also, favorable currency rates added 30 basis points to the net sales growth rate.

The highlight of the company’s fiscal fourth-quarter results was the improvement in margins and stellar EPS growth rates. Conagra Brands’ adjusted EPS of $0.50 jumped 35.1% YoY and handily exceeded analysts’ estimate of $0.44.

The company’s adjusted gross margin improved by 12 basis points to 29.2%—which is commendable, given the significant cost pressure from higher input and logistics costs. Higher pricing and mix and productivity savings drove the company’s margins. General Mills (GIS) and J.M. Smucker (SJM) also managed to improve their margins during the recently concluded quarter.

Conagra Brands also announced its acquisition of Pinnacle Foods (PF) today, which is likely to fortify its position in the growing US frozen foods category.

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