What Dragged Conagra Brands’ Q4 Earnings Down?



Earnings missed estimates

Conagra Brands (CAG) posted adjusted earnings of $0.36 in the fourth quarter of fiscal 2019, implying a YoY decline of 28.0% on a YoY basis. Moreover, Conagra Brands’ adjusted EPS also missed analysts’ consensus estimate of $0.41. Lower organic sales, weakness in margins, and increased interest expenses dragged Conagra Brands’ earnings down. Also, an increase in outstanding share count pressured earnings further. However, the lower tax rate supported the fourth-quarter earnings.

Notably, increased interest expenses and higher outstanding share count negatively impacted Conagra Brands’ adjusted earnings by $0.16 and $0.08 during the reported quarter.

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Conagra Brands’ adjusted gross margin contracted 202 basis points to 27.1%, reflecting a negative impact of 190 basis points from inflation in input costs. Meanwhile, dilution from the Pinnacle acquisition had a negative impact of 110 basis points. Also, increased retailer investments adversely impacted gross margin rate by ten basis points. However, higher pricing and productivity savings contributed 100 basis points to the gross margin rate.

The adjusted operating margin fell 76 basis points to 13.2%, reflecting lower gross margins partially offset by productivity savings and a favorable SG&A rate in the International segment.


Management expects its adjusted EPS to be in the range of $2.08 to $2.18 in fiscal 2020. The guidance includes a $0.02 negative impact from the Gelit divestiture.


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