Conagra Brands (CAG) dipped in pre-market trading on Wednesday after the company reported disappointing Q1 results. The packaged food company behind brands like Birds Eye and Boomchickapop reported adjusted earnings of $0.53 per share, a decline of 19.7% year-over-year. This fell short of Street estimates of $0.59 per share.
Why Did CAG’s Revenues Decline in Q1?
Furthermore, the company’s revenues fell by 3.8% year-over-year to $2.8 billion, compared to analysts’ estimates of $2.84 billion. Conagra has experienced a decline in demand due to its price hikes on products like frozen meals and Slim Jim beef jerky. As a result, many consumers have started to switch to more affordable private-label brands. Reflecting this shift, the company’s total organic sales volumes decreased by 1.6% in the first quarter, following a 1.8% decline in the fourth quarter.
The impact was particularly felt in Conagra’s Grocery and Snacks unit, where volumes fell by 1.8%. This unit comprised more than 40% of CAG’s revenues in Q1, as shown in the TipRanks Revenue Breakdown tool below. Additionally, the Food Service segment saw an even sharper decline, with volumes dropping 11.1%. Moreover, Conagra faced temporary manufacturing disruptions in its Hebrew National Hot Dog business during the quarter, which led to a $27 million hit to its first-quarter results.
CAG Reiterates FY25 Outlook
Looking forward, CAG reiterated its FY25 outlook and expects its organic net sales to range from a decline of 1.5% to flat year-over-year, with adjusted earnings likely to be between $2.60 and $2.65 per share. Analysts expect the company to report earnings of $2.61 per share.
Is CAG a Good Stock to Buy?
Analysts remain sidelined about CAG stock, with a Hold consensus rating based on two Buys and 10 Holds. Over the past year, CAG has increased by more than 15%, and the average CAG price target of $30.82 implies a downside potential of 5.8% from current levels. These analyst ratings are likely to change following CAG’s results today.
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