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Conagra Brands Beat Q3 Profit Estimate, Stock Rose

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Third-quarter results

Conagra Brands (CAG) reported mixed third-quarter results on March 21. The company’s adjusted third-quarter earnings for the period ending February 24 beat analysts’ estimate. Conagra Brands stock rose ~6% in the pre-market session.

Conagra Brands’ net sales marked strong double-digit growth, which reflected incremental sales from its recent acquisitions of Pinnacle Foods and Sandwich Bros. Currency volatility and divestitures remained a drag. As a result, Conagra Brands missed analysts’ sales estimate.

Conagra Brands’ organic sales rose 1.9% during the third quarter due to higher volumes and pricing. In comparison, General Mills (GIS), which posted better-than-expected third-quarter results on March 20, also reported better organic sales due to its improved pricing and mix.

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The company’s adjusted gross margin fell by 115 basis points, which reflected increased input and transportation costs. Also, brand-building investments subdued the gross margins. Despite the weak gross margin, Conagra Brands’ adjusted operating margin expanded by 130 basis points due to the lower SG&A expense rate and higher pricing and mix.

Key financials

Conagra Brands reported net sales of $2.7 billion in the third quarter, which increased 35.7% on a YoY (year-over-year) basis. However, the earnings missed analysts’ estimate of $2.8 billion. The company’s bottom line fell 16.4% YoY to $0.51, which reflected higher interest expenses and an increase in the outstanding share count. The adjusted EPS beat analysts’ estimate of $0.49.

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