Weak organic volumes and currency volatility to blame

Conagra Brands (CAG) posted net sales of $2.61 billion in the fourth quarter of fiscal 2019, which was short of analysts’ consensus estimate of $2.66 billion. Management blamed adverse foreign exchange rates and divestitures for limiting the sales growth rate. Moreover, weakness in the organic volumes further remained a drag.

Including the fourth quarter, Conagra Brands has now missed analysts’ sales expectations for the fourth consecutive quarter. However, its net sales continued to grow at a robust pace thanks to the acquisition of Pinnacle Foods.

Here’s Why Conagra Brands Missed Q4 Sales Estimates

Q4 sales in detail

Conagra Brands’ fourth-quarter fiscal 2019 sales jumped 32.9% on a YoY basis, reflecting a contribution of 33.9% from acquisitions and divestitures. Unfavorable currency rates had a negative effect of 0.3%. Conagra Brands’ organic sales fell 0.7%, reflecting a decline of 1.2% in base volumes. However, pricing and mix improved by 0.5%.

Notably, General Mills (GIS) also missed analysts’ expectation in the fourth quarter, owing to the lower volumes and unfavorable currency rates. However, net sales continued to benefit from the acquisition. Campbell Soup (CPB) and J.M. Smucker’s (SJM) top line also gained from their recent acquisitions.

Guidance

Conagra Brands’ net sales are likely to grow at a double-digit rate in the coming quarters, reflecting incremental sales from Pinnacle Foods. Conagra Brands expects its net sales to increase by 13.5% to 14.0% in fiscal 2020. Moreover, organic sales are expected to mark 1.0% to 1.5% growth.

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