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Conagra Brands cites higher costs, falling margins in earnings report

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Yahoo Finance Live anchor Brian Sozzi breaks down Conagra's fourth-quarter earnings results and the reasons why the company missed expectations.

Video Transcript

BRIAN SOZZI: So let's switch gears to Conagra because I think that's actually one of the sneaky important reports here out this morning. I'm looking at Conagra. They're reporting pricing in their grocery and snacks business. So snacks, of course, they make Slim Jim's and other various snacks. Pricing up 14.4%. Volume down 7.2%.

Another food maker talking about this term, elasticities. What that means in plain English is food company raise prices, consumers say, you know what, I don't need that extra Slim Jim at an extra higher price. I'm just not putting in my basket.

Now they're also coming out here, and this dovetails what I think what we heard from Hugh Johnston at PepsiCo earlier in the week when he came on with us. Conagra guiding to low teens inflation over the next 12 months. That is exactly what we heard from PepsiCo. That is huge. It's huge.

JULIE HYMAN: It's interesting that we are not seeing a similar reaction in Conagra stock as we did to Pepsi because there are some parallels in these numbers. And the company says organic net sales for the year are going to rise 4% to 5%. That's higher than analysts had estimated.

Adjusted operating margin-- margin going to be about 15%. I'm not sure how that-- that actually [INAUDIBLE] that's a little bit shy of estimate. So it looks like the margin might be part of the area of concern here for investors.

BRIAN SOZZI: They-- Conagra has been another one of those food companies where they've increasingly warned about inflation. So you don't want to say this what they said today is priced in the stock because the market reaction here suggests it hasn't been priced in the stock, but another food company talking about low teens inflation. So that could be anywhere from 10 to 14% over the next 12 months. That takes us, what, out until next year?

JULIE HYMAN: Yeah, but if you look at that stock chart that we just showed for the year, Conagra has actually held up a lot better than the market. It's down just about 1 and 1/2 percent where we have seen the rest of the market in a bear market, right? Still down 20% on the year. So even though it's not one of the best performers on the year, it's certainly been an outperformer as we--

BRIAN SOZZI: We all need Slim Jim's, Reddi-Wip, Vlasic Pickles, and Orville Redenbacher Popcorn, all under the Conagra Brands.

JULIE HYMAN: Well, some of us do anyway.