Packaged-foods company Conagra Brands (CAG 0.40%) had a mixed quarter and provided disappointing guidance for its new fiscal year. Investors reacted by sending shares of Conagra down as much as 5%, before they rallied to be down only 2% as of 1:30 p.m. ET on Thursday.
Price inflation is eating into sales
Conagra -- whose brands include Birds Eye, Duncan Hines, Healthy Choice, Slim Jim, and Reddi-wip -- reported adjusted earnings of $0.61 per share in its fiscal fourth quarter (ending May 26), beating Wall Street's $0.57 consensus estimate. But revenue, at $2.91 billion, was a little light compared to the $2.93 billion estimate, and Conagra sees fiscal 2025 falling short of expectations.
The company said it sees fiscal 2025 earnings coming in at between $2.60 and $2.65 per share, short of the $2.69 estimate, on organic sales that are likely to be down 1.5% to merely flat.
"We expect a gradual waning of the challenging industry trends seen throughout fiscal year 2024, as consumers adapt and establish new reference prices," CEO Sean Connolly said.
Is Conagra stock a buy?
Conagra is seeing some sales sluggishness as consumers adjust to price inflation, but as Connolly said, that is likely to ease over time. Meanwhile, international sales remain a bright spot. International was the only segment that saw growth in the just-completed quarter.
With the drop, investors buying in now can enjoy a dividend yielding nearly 5%. But if recent history is a guide, that might be all they get, as the stock is largely flat over the last five years and trailing the market by about 86 percentage points.
Until Conagra can get its growth engine going, investors can probably find better investment options.
