Hot Retail stock to watch: Conagra Brands Inc (NYSE: CAG)

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Conagra Brands Inc (NYSE: CAG) stock rose over 0.4% in the pre-market session on 1st July, 2020 (Source: Google finance) after the company posted the net income of $201.4 million in the fourth quarter to May 31, up from $126.5 million in the year-earlier period due to the strong demand for at-home dining during the pandemic. The Demand for packaged foods with long shelf lives has continued into the first quarter of 2021 even as many U.S. states ease restrictions, with consumers working from home looking to avoid going to restaurants due to fears of contracting the virus.

CAG in the fourth quarter of FY 20 has reported the adjusted earnings per share of 75 cents, beating the analysts’ estimates for the adjusted earnings per share of 66 cents, according to the FactSet consensus. The EPS is mainly driven by the increase in operating profit related with the net sales and margin increases, we also had higher income from Ardent Mills as COVID related demand was a net benefit. The company had reported the adjusted revenue growth of 25.8 percent to $3.29 billion in the fourth quarter of FY 20, beating the analysts’ estimates for revenue of $3.15 billion. The organic net sales increased 21.5% in the fourth quarter due to 21% volume growth, with price/mix contributing 0.5 percentage point. The adjusted operating margin expanded almost 400 basis points for the fourth quarter. Grocery & Snacks segment delivered very strong organic net sales growth of 40.4%. The International segment posted 19.8% organic net sales growth on the back of the strong growth in Canada and better than expected growth in the Mexican and export businesses due to the pandemic. Foodservice reported an organic net sales decline of 31.5%, which was better than anticipated as many restaurants continued to serve customer consumers with curbside pickup, drive-through or partial capacity.

The company expects first-quarter adjusted EPS to be in the range of 54 cents to 59 cents, compared to a FactSet consensus of 54 cents. Conagra also projected organic net sales to rise in the range of 10% to 13%, even as it anticipates decreased demand for products the company sells directly to restaurants. The adjusted operating margin is expected to be in the range of 17% to 17.5% for the first quarter. The company has also reaffirmed its fiscal 2022 outlook and is on track to deliver our total synergy target of $305 million by the end of fiscal ’22.

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