Conagra Brands Backs FY18 View As Q1 Earnings Beat View; Plans $1.1 Bln Buyback

Packaged food company Conagra Brands, Inc. (CAG) on Thursday reaffirmed its forecast for fiscal 2018 after reporting first-quarter adjusted earnings from continuing operations above market estimates. On a reported basis, attributable net income declined in the quarter. Further, the company said it expects to repurchase approximately $1.1 billion of shares in the fiscal year.

Sean Connolly, president and chief executive officer, said, “Fiscal 2018 is off to a strong start. We continued to see gross margin expansion, despite higher than expected inflation and our planned increase in slotting investments to fund innovation. Most notably, our sales trends improved further this quarter.”

For fiscal 2018, the company continues to expect adjusted earnings per share from continuing operations in the range of $1.84 to $1.89. On average, 14 analysts polled by Thomson Reuters expect earnings of $1.86 per share for the year. Analysts’ estimates typically exclude special items.

The company continues to expect reported and organic net sales development in the range of 2 percent decline to flat. Adjusted operating margin is expected in the range of 15.9 percent to 16.3 percent.

In the first quarter, net income attributable to the company declined 18.1 percent to $152.5 million from $186.2 million a year ago. Earnings per share declined 14.3 percent to $0.36 from $0.42 a year ago.

The prior year results were benefited by significant income from continuing operations. On a continuing operations basis, income grew 55.8 percent to $153.6 million, and earnings per share climbed 63.6 percent to $0.36 from $0.22 last year.

Adjusted earnings per share from continuing operations were $0.46, compared to $0.39 last year. Analysts were looking for earnings of $0.40 per share for the quarter.

Gross margin increased 3 basis points to 28.8 percent. Adjusted gross margin increased 26 basis points to 29.2 percent. The company noted that higher price/mix and the impact of divesting lower margin businesses offset higher than expected inflation and incremental slotting fees.

Net sales decreased 4.8 percent to $1.80 billion from $1.90 billion a year ago. Organic net sales decreased 3 percent, reflecting continued sequential improvement, the company said.

Net sales for the Grocery & Snacks segment decreased 2 percent to $746 million, even as acquisitions of the Duke’s, BIGS, and Frontera businesses added over 3 percent to the growth rate. Organic net sales decreased 5 percent.

Net sales for the…

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