Conagra Brands topped earnings and revenue estimates Thursday, as the packaged food company offset any inflation headwinds with product price increases. CAG earnings come on the heels of frozen potato giant Lamb Weston beating earnings predictions Wednesday as packaged food stocks have been holding up well despite economic headwinds and a difficult market environment. Conagra stock fell Thursday morning.
Packaged Food Stock: Conagra Earnings
Estimates: Analysts expect Conagra earnings to grow 4% to 52 cents per share in Q1. Wall Street forecasts revenue to increase 8% to $2.8 billion, according to FactSet.
Results: Conagra earnings grew 14% to 57 cents per share. Sales increased 9.5% to $2.9 billion.
The company said price increases offset inflation woes and that the supply chain improved during the first quarter.
"We continued to deliver improved service and productivity as we navigate ongoing inflationary pressures and industry-wide supply chain challenges," CEO Sean Connolly said in a news release.
CAG shares dropped 3.6% to around 32.6 during Thursday's market trading. The packaged food stock had dropped 0.3% to 33.81 Wednesday. The stock is in consolidation with an official 37.07 buy point, according to MarketSmith.
Conagra Brands is based in Chicago and has been around since 1919. The food company operates under around 20 brands, including Duncan Hines, Slim Jim, Gardein and Earth Balance.
In Q4 2022, Conagra narrowly beat views on earnings while it just missed on revenue estimates. Sales increased 6.2% to $2.9 billion while earnings grew 20% to 65 cents per share.
The company also reaffirmed its fiscal 2023 outlook of sales growth with 4%-5% and an adjusted EPS increase of 1%-5%. CAG reported Thursday that for Q2 2023, it has planned for continued supply chain issues along with "volume weakness" after it increased prices to respond to inflation in Q1.
On July 22, Conagra announced it had approved a 5.6% quarterly dividend increase to 33 cents per share. This is equivalent to $1.32 per share annually, yielding 3.9%.
Packaged food stock Conagra Composite Rating of 84. It has a 74 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share price movement with a 1 to 99 score. The EPS rating is 78.
Packaged Food Stocks Holding Up
Packaged food stocks are usually insulated from market drop offs or economic downturns, as consumers generally continue purchasing these staple items even as they cut other costs. This appears to be holding true as major indexes look to rally as inflation has driven food prices up 11% year-over-year, according to federal data.
Packaged food companies have also been are grappling with supply chain issues. However, despite these headwinds, packaged food stocks are gaining strength and the industry group has climbed to rank No. 21 out of IBD's 197 industry groups. The industry has vaulted up the ranks from 85th six months ago.
Hostess Brands, Post Holdings, Lamb Weston and General Mills are among the packaged food stocks leading the group.
Following Lamb Weston and Conagra, fellow packaged food stock PepsiCo will report third-quarter earnings on Oct. 12.
Lamb Weston Earnings
Estimates: Wall Street expects EPS to grow 150% to 50 cents per share in Q1 2023. Revenue is predicted to increase 14% to $1.13 billion, according to FactSet.
Results: Sales increased 14% to $1.13 billion while earnings ballooned 317% to 75 cents per share in Q1.
LW shares edged up 0.6% to 82.68 Thursday after increasing 4% Wednesday. On Tuesday, the stock jumped 3%, trading at $78.94. The packaged food stock has formed a flat base with a 83.39 buy point, according to MarketSmith analysis.
The Eagle, Idaho-based frozen potato and french-fry giant sells retail and private label products globally. It also has vegetable and dairy business segments.
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"We continue to manage through this difficult macro environment and are on track to deliver the higher end of our fiscal 2023 financial targets," CEO Tom Werner said in a statement.
Werner added its potato crop is expected to be at the "lower end of historical averages with good overall quality and below average yields due to the significant heat waves late in the season."
The company also said while consumers navigate inflation and make cost cuts, it remains confident in the "growth outlook of the frozen potato category."
In Q4 2022, Lamb Weston topped expectations as its earnings popped 48% to 65 cents per share. Sales grew 14% to $1.15 billion. At the end of July, Lamb Weston also announced its outlook for 2023 includes sales in the range of $4.7 billion-$4.8 billion. The company has projected diluted EPS of $2.45-$2.85 per share.
"We enter this new fiscal year with strong underlying fundamentals and business momentum," Werner said on July 27.
Werner added that the company's targets include gross margins approaching "normalized levels" in the second half of fiscal year 2023 with increased pricing, an average potato crop and easing of "cost and logistics pressures" to the supply chain.
In the three years prior to the pandemic, company earnings grew an average 11% per year. Revenue growth averaged 7.9% during the same period.
On Sept. 28, Lamb Weston announced a quarterly dividend of 24.5 cents per share, providing a yield of about 1.2%. The dividend is payable on Dec. 2 to stockholders as of Nov. 4.
Lamb Weston has a Composite Rating of 96. It has a 95 Relative Strength Rating. The EPS rating is 83.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
