Conagra Brands Inc (CAG) Reports Decline in Q2 Earnings Amidst Market Challenges
Net Sales: Reported a decrease of 3.2% to $3.2 billion in the second quarter.
Gross Profit: Declined by 8.2% to $847 million, with gross margin falling 145 basis points to 26.4%.
Operating Profit: Operating profit in key segments saw a downturn, with the Refrigerated & Frozen segment experiencing a 12.0% decrease.
Net Income: Attributable to Conagra Brands decreased by 25.1% to $286 million, or $0.60 per diluted share.
Adjusted EPS: Lowered fiscal 2024 guidance for adjusted EPS to between $2.60 and $2.65.
International Segment: Notably, the International segment reported an 8.1% increase in net sales, driven by strong performance in Mexico.
Dividend: The company paid a dividend of $0.35 per share during the quarter.
On January 4, 2024, Conagra Brands Inc (NYSE:CAG) released its 8-K filing, detailing the financial results for the second quarter of fiscal year 2024, which concluded on November 26, 2023. The company, a leading packaged food entity known for brands like Marie Callender's, Healthy Choice, and Birds Eye, reported a decrease in net sales and gross profit amidst a challenging macro environment.
Financial Performance Overview
Conagra Brands Inc (NYSE:CAG) reported a 3.2% decline in net sales to $3.2 billion for the quarter. The decrease in organic net sales by 3.4% was attributed to a 0.5% negative impact from price/mix and a 2.9% decrease in volume. Gross profit also saw a decrease of 8.2% to $847 million, with a gross margin reduction of 145 basis points to 26.4%. Selling, general, and administrative expenses increased by 6.8% to $398 million, influenced by an impairment and legal reserve adjustments.
Net income attributable to Conagra Brands decreased by 25.1% to $286 million, or $0.60 per diluted share, primarily due to the decrease in gross profit and increase in SG&A. Adjusted EBITDA decreased by 7.0% to $661 million, driven by the decrease in adjusted gross profit.
Segment Performance and Challenges
The Grocery & Snacks segment reported a 4.1% decrease in net sales, while the Refrigerated & Frozen segment saw a 5.8% decrease. The International segment, however, increased net sales by 8.1%, with organic net sales growth driven by strong performance in Mexico. The Foodservice segment reported a 4.3% increase in net sales, with operating profit increasing by 33.2% to $38 million.
Despite these challenges, Conagra Brands Inc (NYSE:CAG) remains committed to investing in its brands, particularly in the frozen business, to generate market share gains and build momentum for the future.
Outlook and Adjustments
Conagra Brands Inc (NYSE:CAG) has revised its fiscal 2024 outlook, lowering organic net sales growth, operating margin, and adjusted EPS expectations. The company now expects adjusted EPS to be between $2.60 and $2.65. This adjustment reflects year-to-date results, anticipation of a slower volume recovery, and increased brand investments.
Items affecting the comparability of EPS included approximately $0.02 per diluted share of net expense related to corporate hedging derivative losses and approximately $0.07 per diluted share of net expense related to an impairment of a business held for sale.
Conagra Brands Inc (NYSE:CAG) will continue to navigate the complex market environment with a focus on strategic investments and operational efficiency to drive long-term growth.
Explore the complete 8-K earnings release (here) from Conagra Brands Inc for further details.
This article first appeared on GuruFocus.
