[ACCESSWIRE]
LONDON, UK / ACCESSWIRE / October 4, 2016 / Active Wall St. announces its post-earnings coverage on ConAgra Foods, Inc. (NYSE: CAG). The company recorded financial results for first quarter fiscal 2017 on September 29th, 2016. The packaged-food giant swung to profit; however its sales were below market expectations. Register with us now for your free membership at: http://www.activewallst.com/register/.
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Earnings Reviewed
For the three months ended on August 28th, 2016, ConAgra reported income of $186.2 million, or $0.42 per diluted share, compared to a year-ago loss of $1.15 billion, or $2.65 per share. Adjusted diluted earnings per share from continuing operations for Q1 FY17 was $0.61, 49% above the $0.41 delivered in Q1 FY16. The improvement in earnings was attributed to benefits from continued gross margin expansion, lower SG&A expense, and lower interest expense, partially offset by the impact of lower sales volume, lower earnings from its Ardent Mills joint venture, and costs related to a product recall. Analysts estimated earnings of $0.48 per share.
Revenue for the period was $2.67 billion, down 4.6% on y-o-y basis. The decline was attributed to lower volumes accrued due to the company's initiatives to create an improved quality revenue base. The company's divestitures and unfavorable foreign currency translation lowered sales by roughly 2%. However, these headwinds were partially offset by raised price/mix and improved Lamb Weston trade. The revenue numbers were below analysts' estimate of $2.73 billion.
In Q1 FY17, ConAgra's gross margin expanded 200 basis points to 27.3% compared to 25.3% in Q1 FY16.
Segment Results
In Q1 FY17, ConAgra's grocery and snacks segment generated revenue of $757 million, down 5.4% on y-o-y basis reflecting a 6% decline in volume and a 1% improvement in price/mix. In its refrigerated and frozen segment, net sales were $605 million, down 8% from the year-ago period, reflecting an 11% decline in volume, as the company stopped using deep discounts to drive volume in its Banquet frozen meals and a 3% improvement in price/mix.
ConAgra's international segment reported net sales of $195 million for Q1 FY17, down 6% from the year-ago period, reflecting a 2% decline in volume, a 1.5% improvement in price/mix, and a negative 5% impact from foreign exchange. For the company's food service segment, net sales were $268 million for the quarter, down 1% from the year-ago period. In the commercial segment, net sales were $843 million, or 2% below the prior year's quarter, driven by the JM Swank and Spicetec divestitures. Lamb Weston's net sales increased 4% versus the prior year's quarter. The company realized proceeds of $486 million from these divestitures.
Lamb Weston's Spinoff
ConAgra stated that it remains on-track to execute the spin-off of the Lamb Weston business this fall. The spin-off will result in two independent, publicly-traded, pure play companies, ConAgra Brands and Lamb Weston. Lamb Weston and ConAgra Brands have announced their intention to host investor events on October 13, 2016, and October 18, 2016, respectively. Each company expects to share more details, including fiscal year 2017 and longer-term outlooks, growth initiatives, efficiency programs, and capital allocation priorities, at these events.
Balance Sheet
ConAgra ended Q1 FY17 with $795 million of cash on hand and no outstanding commercial paper borrowings. Total net cash flows from operating activities from continuing operations for the reported quarter were $337 million versus $64 million in the year-ago quarter. Senior long-term debt (excluding current installments) was $4.26 billion, down from $4.72 billion as of May 29, 2016. The Company repaid approximately $550 million of debt in the reported quarter. For Q1 FY17, ConAgra reported capital expenditures of $117 million versus $102 million in the prior year's quarter.
During Q1 FY17, the company repurchased approximately 1.8 million shares of its stock at a cost of approximately $86 million, and had approximately $46 million remaining on its existing share repurchase authorization as of the end of the first quarter. The company paid $110 million in dividends during Q1 FY17, versus $107 million in the prior year's quarter. On 23rd, September 2016, ConAgra's board of directors approved a dividend payment of $0.25 per share of its common stock to be paid on November 30, 2016 to stockholders of record at the close of business on October 31, 2016.
Stock Performance
On Monday, October 03, 2016, ConAgra Foods' shares were slightly up 0.89%, finishing the day at $47.53 with volume of 4.44 million shares exchanging hands by the close of the trading session, which was above the 3-month average volume of 2.86 million shares. For the last six months and previous twelve months, the stock has gained 6.58% and 16.33%, respectively. Furthermore, on a year to date basis, the stock gained 14.71%. The stock is trading at a PE ratio of 43.21 and has a dividend yield of 2.10%.
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