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Category: Stock Market and Conagra Brands
Date: 27 September 2019 Stock Price: $31 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Conagra Brands a groceries and snacks, refrigerated and frozen foods as well as food services supplier.
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About Conagra Brands
Conagra Brands (NYSE: CAG), headquartered in Chicago, combines a rich heritage of making great food with a sharpened focus and entrepreneurial spirit. We’re transforming the way we operate to fulfill what consumers and customers want, in a smart, simple way. We’re modernizing our iconic food brands, leveraging fresh opportunities and adapting to a changing landscape – all with a culture that’s ready to capture growth and drive shareholder value.
CONAGRA BY THE NUMBERS
Conagra’s iconic brands, such as Birds Eye®, Duncan Hines®, Healthy Choice®, Marie Callender's®, Reddi-wip®, and Slim Jim®, as well as emerging brands, including Angie's® BOOMCHICKAPOP®, Duke's®, Earth Balance®, Gardein™, and Frontera®, offer choices for every occasion.
CONAGRA BY THE NUMBERS
- Number of Locations: Approximately 50
- Number of Employees: Approximately 18,000
- Revenue: $11 billion
Conagra’s iconic brands, such as Birds Eye®, Duncan Hines®, Healthy Choice®, Marie Callender's®, Reddi-wip®, and Slim Jim®, as well as emerging brands, including Angie's® BOOMCHICKAPOP®, Duke's®, Earth Balance®, Gardein™, and Frontera®, offer choices for every occasion.
Duke's one of Conagra's brands
Overview of Conagra's latest earnings report
The numbers we are interested in (for the quarter):
- Net sales: $2.390 billion (up from $1.834 billion from the same quarter of the previous year)
- Net sales increased by 30.3% over the last 12 months
- Cost of goods sold: $1.726 billion (up from $1.318 billion for the same quarter of the previous year)
- Cost of goods sold increased by 30.9% over the last 12 months
- Net income: $173.8 million (down from $178.2 million for the same quarter of the previous year)
- Diluted income per share: $0.36 (down from $0.45 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 486.8 million (up from 394.1 million for the same quarter of the previous year)
- Cash and cash equivalents: $64.7 million
- Cash and cash equivalents per share: $0.13
- Cash and cash equivalents makes up 0.42% of Conagra's market capital
- Cash and cash equivalents makes up 0.29% of Conagra's total assets
- Accounts receivable: $776.3 million
- Accounts receivable makes up 3.47% of Conagra's total assets
- Stockholders equity of Conagra: $7.56 billion
- Stockholders equity per share: $15.52
- Conagra's is trading at 2 times its stockholders equity which is within the expected range of between 2 and 4 which most companies tend to trade at.
- Cash generated from operation: $173.4 million
- Cash generated from operations per share: $0.36
- Cash generated from operations per share: $0.36
Conagra's management commentary on the results and earnings guidance
CHICAGO, Sept. 26, 2019 /PRNewswire/ -- Today Conagra Brands, Inc. (NYSE: CAG) reported results for the first quarter of fiscal year 2020, which ended on August 25, 2019
Sean Connolly, president and chief executive officer of Conagra Brands, commented, "After one quarter, fiscal 2020 is on-track with our plan as we execute against each of the priorities we outlined previously: maintaining the momentum on Legacy Conagra, applying our value-over-volume playbook to Pinnacle, and delivering against our integration, synergy, and de-leveraging commitments. I am pleased that our domestic retail businesses outperformed our first quarter organic net sales growth plan. While our Foodservice and International businesses experienced unplanned softness on the top line this quarter, they outperformed our operating profit and margin expectations. We believe the first quarter net sales issues in these segments were discrete and are now largely behind us."
He continued, "Our expectation for fiscal 2020 is that the investments we are making in the first half of the year, in particular the second quarter, will result in strong second half performance, with the impacts of new innovation in the frozen and snacks businesses, smart promotional support in key grocery brands, the continued implementation of our Pinnacle improvement plan, and the impact of synergy capture all greatest in the third and fourth quarters. Given our progress in the first quarter, and expectations for the balance of the year, we are reaffirming our fiscal 2020 guidance across all elements."
Fiscal 2020 Outlook
The Company is reaffirming its fiscal 2020 guidance. Note that organic net sales growth excludes the impact of fiscal 2020's 53rd week. All other metrics include the impact of the 53rd week.
Sean Connolly, president and chief executive officer of Conagra Brands, commented, "After one quarter, fiscal 2020 is on-track with our plan as we execute against each of the priorities we outlined previously: maintaining the momentum on Legacy Conagra, applying our value-over-volume playbook to Pinnacle, and delivering against our integration, synergy, and de-leveraging commitments. I am pleased that our domestic retail businesses outperformed our first quarter organic net sales growth plan. While our Foodservice and International businesses experienced unplanned softness on the top line this quarter, they outperformed our operating profit and margin expectations. We believe the first quarter net sales issues in these segments were discrete and are now largely behind us."
He continued, "Our expectation for fiscal 2020 is that the investments we are making in the first half of the year, in particular the second quarter, will result in strong second half performance, with the impacts of new innovation in the frozen and snacks businesses, smart promotional support in key grocery brands, the continued implementation of our Pinnacle improvement plan, and the impact of synergy capture all greatest in the third and fourth quarters. Given our progress in the first quarter, and expectations for the balance of the year, we are reaffirming our fiscal 2020 guidance across all elements."
Fiscal 2020 Outlook
The Company is reaffirming its fiscal 2020 guidance. Note that organic net sales growth excludes the impact of fiscal 2020's 53rd week. All other metrics include the impact of the 53rd week.
- Organic net sales growth of 1.0% to 1.5%
- Reported net sales growth of 13.5% to 14.0%
- Adjusted operating margin in the range of 16.2% to 16.8%
- Adjusted net interest expense of approximately $505 million
- Adjusted effective tax rate of 24% to 25%
- Average diluted share count of approximately 488 million
- Adjusted EPS in the range of $2.08 to $2.18
- Free cash flow of approximately $1 billion
Conagra Brands (NYSE: CAG) stock price history
The image below, obtained from Google, shows the stock price history of Conagra Brands (NYSE: CAG) over the last 5 years. And it's been a very volatile time for Conagra Brands (NYSE: CAG), especially towards the end of 2018 and start of 2019 with the stock show sharp declines and recoveries over a very short period of time . 5 years ago Conagra Brands stock was trading around $26 a stock, and its currently it's trading at $31 That's a return of 19.2% over the 5 year period. Conagra Brands is trading a lot closer to its 52 week high than it is to its 52 week low, which to us is a clear sign that the short term momentum and sentiment of Conagra Brands stock is positive.
Conagra Brands (NYSE: CAG) latest stock valuation
So based on the earnings report and fiscal guidance of Conagra (NYSE:CAG) what do we value Conagra (CAG) stock at? Based on their latest earnings report and the outlook provided our target (full value) price for Conagra is $33.60 a stock. We therefore believe the stock of Conagra is slightly undervalued
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $33.60 Therefore we believe the a good entry point into the stock is below $30.30. We believe the stock of Conagra (CAG) will tick up from its currents levels to closer to our target (full value) price in coming weeks and months.
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $33.60 Therefore we believe the a good entry point into the stock is below $30.30. We believe the stock of Conagra (CAG) will tick up from its currents levels to closer to our target (full value) price in coming weeks and months.