Conagra Brands (CAG) posted net sales of $2.71 billion in the third quarter of fiscal 2019 (which ended on February 24), falling marginally short of analysts’ consensus estimate of $2.75 billion. Divestitures and currency volatility remained a drag.
Including the third quarter, Conagra Brands has now missed analysts’ sales estimates for the third consecutive quarter. However, its top line has recorded phenomenal growth, which should bring investors some respite.
We expect Conagra Brands to sustain double-digit sales growth in the coming quarters led by its acquisition of Pinnacle Foods. Meanwhile, its business is expected to remain strong driven by innovations and brand investments. Improved pricing and mix should further support the company’s top line growth rate.
CAG’s peers General Mills (GIS), the Campbell Soup Company (CPB), and the J.M. Smucker Company (SJM) have also managed to accelerate their sales growth rates on the back of their recent acquisitions. General Mills’ top line rose 8.1% during the third quarter of fiscal 2019, reflecting a significant contribution from its Blue Buffalo acquisition. Meanwhile, Campbell Soup’s Snyder’s-Lance and Pacific Foods acquisitions contributed 26% to its fiscal 2019 second-quarter net sales growth. J.M. Smucker’s acquisition of Ainsworth continues to contribute significantly to its top line growth.
Conagra Brands’ top line is expected to grow at a stellar rate in the coming quarters. Analysts expect Conagra Brands’ net sales to mark more than 35% growth in the period. Its organic sales are expected to benefit from improved pricing and mix. Meanwhile, higher organic volumes led by innovation should further support its top line growth.
CAG faces tough YoY comparisons in the fourth quarter of fiscal 2019, which could limit its organic sales growth rate.