Conagra Brands Inc (NYSE: CAG) stock surged 15.87% on December 19th, 2019 (Source: Google finance) after the company’s net income attributable to Conagra nearly doubled to $260.5 million in the second quarter 2020 from a year earlier. The company has posted better than expected results for the second quarter of FY 20 due to strong demand for the packaged food maker’s snacks and frozen foods. However, the company has cut its annual forecast for net sales growth and profit, on the back of the sale of its direct-store-delivery snacks business in October.
CAG in the second quarter of FY 20 has reported the adjusted earnings per share of 63 cents, beating the analysts’ estimates for the adjusted earnings per share of 57 cents, according to IBES data from Refinitiv. The company had reported the adjusted revenue growth of 18.3 percent to $2.82 billion in the second quarter of FY 20, beating the analysts’ estimates for revenue of $2.80 billion. The sales are affected by a 19.6% increase from the acquisition of Pinnacle, 2.9% net decline from the divestitures of the Wesson oil business, the Gelit business, and the DSD snacks business (the “Sold Businesses”); and a 1.6% rise in organic net sales, which was driven by 1% volume growth and 0.6% price mix favorability. The adjusted gross profit rose by 14.1% to $804 million on the back of the net impact of the addition of Pinnacle’s gross profit and cost synergies, as well as the benefits of price/mix and supply chain productivity. These benefits were partially offset due to decrease in profit associated with the Sold Businesses, input cost inflation, and increased brand-building investments with retailers. The company’s adjusted operating profit increased 15.7% in the second, and the adjusted operating margin came in at 17.1%.
Moreover, Grocery & Snacks’ net sales grew 14.2% in the second quarter, with the acquisition of Pinnacle adding 16.9% and the divestiture of the Wesson oil and DSD snacks businesses subtracting 3.6%. Refrigerated & Frozen, quarterly net sales and organic net sales for the segment grew 28.8% and 2.4% respectively. International net sales grew 7.3%. Net sales for the Foodservice segment rose 6.8% in Q2, with an organic net sales increase of 0.8%
Meanwhile, the company has raised its forecast for annual cost synergies for its Pinnacle acquisition by $20 million to $305 million by the end of fiscal 2022, and intends to invest the savings to boost sales.