Financial Performance

Conagra Boosts Guidance Despite Rising Costs

The company has been able to offset higher supply chain costs by cutting back on discounts and other expenses.
Matthew HellerMarch 22, 2018

Rising supply chain costs apparently aren’t fazing Conagra Brands, which on Thursday reported better-than-expected quarterly earnings and raised its full-year profit outlook.

The maker of Hunt’s ketchup and Slim Jim meat snacks said it has been able to counter higher commodities and freight costs by cutting back on discounts and other expenses. It has also been modernizing some of its brands, particularly in the frozen food portfolio.

For the third quarter, Conagra’s net income doubled to $362.8 million, or 87 cents per share, reflecting in part a lower tax rate due to the recent tax legislation. Excluding items, adjusted earnings per share came to 61 cents, beating analysts’ projection of 56 cents.

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Revenue rose 0.7% to $1.995 billion, in line with analysts’ expectations. Comparable sales fell 2.2% in as growth in Conagra’s refrigerated and frozen foods was offset by declines in its dry goods segment.

“I continue to be pleased with the progress we are making on improving our fundamentals, particularly on the top line,” CEO Sean Connolly, who has led a turnaround at the company since taking over in 2015, said in a news release.

“Overall, our transformation plan remains squarely on track,” he added. “We continue to invest to drive brand saliency, enhanced distribution, and consumer trial in the face of higher inflation on input and transportation costs, which is pressuring near-term margins.”

As MarketWatch reports, packaged foods companies have been “grappling with higher food costs and a shortage in trucking capacity in the U.S.” On Wednesday, General Mills slashed its full-year guidance, citing higher-than-expected supply chain costs.

Conagra’s adjusted gross margin fell to 30% in the latest quarter, from 31.6% in the prior year. But the company is now predicting adjusted full-year earnings of up to $2.05 per share, up from previous guidance of around $1.89 per share.

“Conagra has been modernizing some of its older brands like Reddi-wip dessert topping and Hebrew National hot dogs to make them relevant to Americans who have shifted to newer, smaller brands that they see as fresher and healthier,” MarketWatch said.