Conagra Brands' (CAG) shares fell 3.5% after reporting a Q4 net loss of $567.3 million and providing weak profit guidance due to high living costs, despite beating EPS estimates.
Conagra Brands (CAG) recently reported its fiscal 2024 fourth-quarter and full-year financial results, revealing a challenging landscape ahead for the processed food giant. Despite beating earnings per share (EPS) estimates with an adjusted EPS of $0.61 for the quarter, Conagra's net loss widened to $567.3 million for the quarter, primarily due to significant non-cash goodwill and brand impairment charges. The company's revenue also experienced a decline, falling 2.3% to $2.91 billion in the quarter, a trend attributed to decreasing volume primarily driven by continued lower consumption trends.
Looking ahead, Conagra provided a cautious outlook for fiscal 2025, warning of a difficult consumer environment. The company expects fiscal 2025 adjusted EPS to be in the range of $2.60 to $2.65, which falls below market estimates. Organic revenue is projected to be flat to down 1.5% from fiscal 2024. CEO Sean Connolly emphasized the ongoing challenges consumers face, particularly due to high living costs, but remained optimistic about a gradual transition towards a more normalized operating environment as consumers adapt to new pricing.
In response to the earnings report and downbeat outlook, Conagra Brands' shares fell by 3.5% midday, reflecting investors' concerns over the company's future performance amid a challenging consumer environment.
The fiscal 2024 results highlighted some positives, including market share gains in key frozen and snacks domains and improvements in domestic retail business volumes, driven by the company's investment in its brands. Conagra also reported a net sales decrease of 1.8% for the full fiscal year 2024, with organic net sales down 2.1%. However, adjusted operating margin saw a slight increase, up 34 basis points to 16.0%.
Conagra's fiscal 2025 guidance also reflects modest expectations for organic net sales growth and adjusted operating margins. The company plans to continue its investment in brand support to facilitate consumer adaptation to new pricing environments. Moreover, Conagra's free cash flow conversion is expected to be approximately 90%, with a net leverage ratio of approximately 3.2x and capital expenditures projected at around $500 million. The continuation of the company's annualized dividend rate of $1.40 per share was authorized by the Board of Directors, underscoring Conagra's commitment to delivering shareholder value despite the challenging operating conditions.
In light of these developments, Conagra is bracing for a challenging fiscal year ahead, with consumer pressures and market dynamics posing significant headwinds. The company's focus on brand investment, operational efficiencies, and financial discipline will be critical as it navigates through the persistently uncertain consumer environment. As Conagra continues to adapt to market changes and consumer behavior shifts, the company remains focused on strengthening its balance sheet and driving long-term shareholder value.
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