ConAgra Brands In 4Q23: An Analyst's Outlook On Expected Growth Amid Supply Chain Disruptions

RBC Capital Markets analyst Nik Modi reiterated a Sector Perform rating on ConAgra Brands, Inc. CAG, with a price target of $38.

The company is scheduled to release its fiscal 2023 fourth-quarter results on July 13, 2023.

The analyst expects more modest growth, once again driven primarily by pricing, and expects impacts in the quarter from supply chain disruptions (which should negatively impact the frozen segment).

For 4Q23, the analyst forecasts organic sales +2.8% (cons. +3%) and EPS of $0.58 (cons. $0.60). 

ConAgra is expected to bear the brunt of the temporary operation disruption of its partner Americold, a cold storage/ logistics company. CAG envisions topline disruptions from ~9 days where they could not operate/ invoice.

Considering these, the analyst estimates revenue growth of 2.7% year over year in the fourth quarter to $2.987 billion. The gross profit margin in the fourth quarter is expected to be 26.6%, mirroring a 175 bps expansion.

The analyst notes that CAG’s tracked channel trends have slowed, +3.7% in IRI for the May quarter, down from +6.3% in Feb. Growth continues to be mainly pricing-driven, up HSD with volumes still down.

Modi still expects a lag in tracked channel data and shipping disruptions in the coming data.

The analyst expects CAG to guide consistently with their long-term algorithm but is more comfortable towards the lower end of their range.

Modi calls for FY24 organic growth of +1.6% (cons. +2.1%), operating margins of 16% (cons. 16.3%), and EPS of $2.88 or +5.7% (cons. $2.86).

The analyst sees risks if disruption impacts linger into H1, which could put further pressure on near-term numbers and create greater reliance on H2 volume recovery against a backdrop of a weakening consumer environment. 

Price Action: CAG shares are down by 0.09% at $33.09 on the last check Wednesday.