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Conagra stock dips on earnings beat, weak forecast

Yahoo Finance Live’s Julie Hyman and Brian Sozzi discuss Conagra Brands’ earnings and forecast.

Video Transcript

JULIE HYMAN: Let's talk about Conagra. Are we--

BRIAN SOZZI: Slim Jim's.

JULIE HYMAN: OK, OK. I just was waiting for some firing back there. OK, Conagra, the company coming out with earnings per share a little bit below estimates, $0.64 a share. $0.70 is what analysts had been expecting. That's the fourth quarter forecast, excuse me. The adjusted earnings per share for the last quarter beat a little bit, revenue beat a little bit, but really, you're talking about an in-line situation here for Conagra. Obviously, this company, you know, you've got to think about the margins that are happening.

Now, the margins did beat estimates. Adjusted operating margin coming in at 13.7%. 14.6% was the estimate, but 13.7% last quarter compares with 16% adjusted operating margin a year earlier. So you can obviously see the pinch that this company is feeling from those higher input costs.

BRIAN SOZZI: Only thing I care about in this report, Julie, it is inflation. Most recent quarter, inflation up 15.4% for a company that sells frozen food and other packaged goods, like Reddi-wip and Slim Jim's. Now they are guiding to 16% inflation in the most recent quarter, or I should say, for the balance of the year. So this is a company that has not been able to push through enough price increases to justify or just to offset the inflation they are, in fact, they're seeing in their business.

And I will add this, too-- not a good job here by the team. They aren't guiding investors' expectations on the inflation they are, in fact, seeing. They could be doing a better job at this. That's why you're seeing Conagra shares, I believe, now down close to down over the past two years versus the S&P 500's 62% gain-- not a good look.

JULIE HYMAN: Yeah, I mean, they're not down very much this morning, which is interesting, even as they come out with that commentary around costs. And also, I mentioned the adjusted operating margin last quarter for the year. They're now saying it's going to be 14.5%, which is down a full percentage point from the prior forecast. So--

BRIAN SOZZI: I do like Slim Jim's, though. I do like Slim Jim's. Those are good. You go to the gas station, you pay $7 a gallon for your gas, you get a Slim Jim. I like it.

JULIE HYMAN: Duly noted. If only you got your Slim Jim for free along with your gasoline, but then that would be even worse for Conagra margins. All right.