Food Giant Conagra Brands Hit By Slower Volume Recovery, Cuts FY24 Outlook

Conagra Brands Inc CAG reported a second-quarter FY24 sales decline of 3.2% year-on-year to $3.21 billion, missing the analyst consensus estimate of $3.24 billion.

The 3.4% decrease in organic net sales was driven by a 0.5% negative impact from price/mix and a 2.9% decrease in volume.

Grocery & Snacks segment sales decreased 4.1% Y/Y to $1.3 billion, and Refrigerated & Frozen segment sales declined 5.8% Y/Y to $1.3 billion.

Adjusted EPS of $0.71 beat the consensus of $0.68.

Adjusted gross profit fell 7.6% to $862 million. The gross margin decreased 145 basis points Y/Y to 26.4%, and the adjusted gross margin decreased 129 basis points to 26.9%.

Adjusted operating margin contracted 108 basis points Y/Y to 15.9%. The company reported $398 million in selling, general, and administrative expenses, a 6.8% increase Y/Y. Adjusted EBITDA of $661 million decreased 7% Y/Y.

Cash and equivalents totaled $61.5 million as of November 26, 2023.

Outlook: Conagra lowered its fiscal 2024 organic net sales growth, operating margin and adjusted EPS outlook to reflect year-to-date results, expectations for a slower volume recovery, and expanded brand investments in the second half of the fiscal year. 

CAG cuts FY24 organic net sales outlook from a growth of 1% to a decline of 1% -2%.

Conagra lowered its FY24 adjusted EPS outlook from $2.70 - $2.75 to $2.60 - $2.65 versus the estimate of $2.67.

CAG expects adjusted operating margin to be 15.6% versus the prior view of 16.0%-16.5%.

Price Action: CAG shares are trading lower by 2.90% at $28.43 in premarket on the last check Thursday.

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