Saporu sees ‘strong value’ in Conagra Brands after Q3 earnings
📈 Conagra Brands reported better-than-expected Q3 earnings, driving the stock higher in premarket trading.
💰 The company achieved an adjusted operating margin of 16.4%, a significant improvement of 49 basis points year-over-year.
📉 Net sales declined slightly by 1.7% to $3.03 billion, with GAAP earnings per share falling from 72 cents to 64 cents.
🔮 Management reiterated guidance for fiscal 2024, projecting organic net sales down up to 2.0% and adjusted EPS between $2.60 and $2.65.
📈 The company raised its adjusted operating margin outlook to approximately 15.8% in the future.
💵 Conagra maintains a dividend yield of 4.82%, which analyst Delano Saporu cites as a key reason for owning the stock.
Bullish Signals
- Conagra Brands improved its adjusted operating margin by 49 basis points to 16.4% in Q3, demonstrating operational efficiency.
- The company revised its forward guidance upwardly, now expecting an adjusted operating margin of around 15.8% for the fiscal year.
- Better-than-expected earnings results drove Conagra stock to trade up in premarket trading despite broader market headwinds.
- Analyst Delano Saporu recommends owning the stock, highlighting its strong value proposition and attractive 4.82% dividend yield.
Risk Factors
- Net sales declined by 1.7% year-over-year to $3.03 billion, indicating a contraction in top-line revenue.
- GAAP earnings per share decreased from 72 cents to 64 cents, reflecting lower profitability on a reported basis.
Full Analysis
Conagra Brands Inc (NYSE: CAG) reported better-than-expected financial results for its fiscal third quarter, causing the stock to trade up in premarket trading despite being down over 20% from its 52-week high. The company posted net sales of $3.03 billion, representing a slight year-over-year decline of 1.7%, while earnings per share dropped from 72 cents to 64 cents on a GAAP basis.
Management reiterated its forward guidance for fiscal 2024, forecasting organic net sales to be down up to 2.0% with adjusted per-share earnings expected between $2.60 and $2.65. Notably, the company revised its outlook upwardly regarding adjusted operating margins, now expecting them to settle around 15.8%, an improvement from previous estimates.
In the third quarter specifically, Conagra improved its adjusted operating margin by 49 basis points to reach 16.4%. CEO Sean Connolly highlighted these operational improvements during the earnings call. Analyst Delano Saporu of New Street Advisors views the stock as having strong value, particularly citing the company's attractive dividend yield of 4.82%.