ConAgra Brands (CAG) Tops Q4 EPS by 6c, Offers Standalone Guidance

June 27, 2018 6:35 AM EDT

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ConAgra Brands (NYSE: CAG) reported Q4 EPS of $0.50, $0.06 better than the analyst estimate of $0.44. Revenue for the quarter came in at $1.97 billion versus the consensus estimate of $1.92 billion.

GUIDANCE:

ConAgra Brands sees Q1 2019 EPS of $0.46-$0.49, versus the consensus of $0.54.

Standalone Fiscal 2019 and Fiscal 2020 OutlookThe Company is providing standalone fiscal 2019 guidance as summarized below:

  • Reported net sales growth in the range of 0.5% to 1.5%.
  • Organic net sales growth, excluding the previously-mentioned impact of the Trenton facility sale and related Foodservice business exit, is expected to be in the range of 1.0% to 2.0%.
  • Adjusted gross margin in the range of 29.7% to 30.0%.
  • Input cost inflation in the range of 3.0% to 3.2%.
  • Adjusted operating margin in the range of 15.0% to 15.3%. As previously mentioned, this metric now reflects the impact of ASU 2017-07.
  • Effective tax rate in the range of 23% to 24%.
  • Pension and Postretirement Non-Service Income, recast as described above, is expected to decrease approximately $46 million. This decrease is related to the previously-mentioned asset mix shift.

The Company is providing standalone fiscal first quarter 2019 guidance as summarized below:

  • Reported net sales growth in the range of 2.0% to 2.5%.
  • Adjusted operating margin in the range of 14.1% to 14.4%.
  • Adjusted diluted EPS in the range of $0.46 to $0.49.

The trued-up three-year standalone fiscal 2020 financial algorithm, which uses fiscal 2017 as the base year, is summarized below:

  • Strategic Shift from A&P Marketing to Retailer Marketing: The Company intends to continue shifting marketing investments from A&P marketing to retailer marketing in order to achieve higher returns on total marketing investments. The Company estimates that A&P as a percent of net sales will decrease by approximately 150 basis points with a corresponding decrease in adjusted gross margin of 150 basis points. While retailer marketing is accounted for as a reduction to net sales, the improved return on these investments is expected to result in a net neutral impact on the 3-year compound annual growth rate (CAGR) of organic net sales.

Prior

Trued-Up

FY17-FY20 Organic Net Sales CAGR3

1% to 2%

1% to 2%

FY20 Adjusted Gross Margin

~32.0%

~30.5%

FY20 A&P (as % of net sales)

~4.7%

~3.2%

  • Changes in Pension Accounting Standards: As previously noted, Pension and Postretirement Non-Service Income will be moved to a new line item. As a result of adopting the new accounting standard, SG&A as a percent of net sales is expected to increase by approximately 100 basis points with a corresponding decrease in operating margin by 100 basis points. There is no impact to Net Income, only a shift between line items.

Prior

Trued-Up

FY20 Adjusted SG&A, excl. A&P

~10.8%

~11.8%

FY20 Adjusted Operating Margin

~16.5%

~15.5%

All guidance metrics shown above include the expected results for the Wesson oil business and exclude the expected results for the Company's Canadian Del Monte processed fruit and vegetable business for the full time-period indicated. The Company continues to assess alternatives for the Wesson oil business. All guidance metrics shown above do not include any impact from the pending acquisition of Pinnacle Foods.

The inability to predict the amount and timing of the impacts of foreign exchange, acquisitions, divestitures, and other items impacting comparability makes a detailed reconciliation of these forward-looking non-GAAP financial measures impracticable. Please see the end of this release for more information.

For earnings history and earnings-related data on ConAgra Brands (CAG) click here.



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