- Conagra Brands had a strong quarter with across-the-board increases in sales, profits and earnings, according to a company statement. Compared to a year ago, sales rose 5.6% to $1.9 billion. Every segment showed operating profit growth and margin expansion.
- Two major segments posted particularly good results. Refrigerated and frozen posted 7.9% net sales growth to $691 million, with organic net sales growth rising 5.2%. Grocery and snacks had total sales of $803 million, which worked out to 7.1% net sales growth and 1.1% organic net sales growth.
- In the report, CEO Sean Connolly said these earnings results are the culmination of hard work since 2016. "We have improved our sales performance with innovation, renovation and enhanced marketing capabilities," he said in the statement. "Clearly, our hard work is paying off with improved and more consistent performance."
Conagra issued its earnings report a day early to coincide with the news of its $10.9 billion purchase of Pinnacle Foods. But the maker of Marie Callender's, Reddi-wip and Healthy Choice didn't need the announcement to share positive news about its future. Conagra's eye for smaller acquisitions, attention to branding and efforts to renovate some of its older brands and segments are paying off.
In 2016, Connolly pledged to revamp Conagra. His goal: To take it from the agriculture-based company it was a century ago and transform it into a dynamic CPG powerhouse. Since Connolly took the helm in 2015, the company sold its private label brands, spun off Lamb Weston frozen potatoes, changed its operating strategies by shifting to a focus on value, updated brands like Slim Jim and Banquet, and acquired several trendy products.
While Conagra's success has many parts, M&A is the most visible — especially with today's news.
Brittany Weissman, an analyst at Edward Jones, said Conagra has excelled in managing expenses and improving profitability by selling more items with higher profit margins. As a result, the company posted improvements in profit margins during the quarter despite facing higher input costs.
"Conagra has come a long way over the past few years simplifying the company and improving sales and profitability," Weissman said in a report. "With the largest pieces of the transformation in the past, we believe the timing is right for Conagra to take another step in transforming the business through acquiring Pinnacle."
Acquisitions also made the biggest impact on the company's earnings report. In the grocery and snacks division, Duke's meat snacks and Bigs sunflower and pumpkin seeds — purchased by the larger company last March — and popcorn brand Angie's Boomchickapop — acquired in September — helped organic net sales increase 1.1%. Revamps of older brands also contributed to the success, with strong growth in Slim Jim, Orville Redenbacher's and Act II. Volumes in this division were down, but Conagra said this is due to the planned discontinuations of underperforming products.
The refrigerated and frozen segment had a similar story. The acquisition of the Sandwich Bros. of Wisconsin brand frozen breakfast and flatbreads late last year helped add to Conagra's growth rate. New products and attention to the Marie Callender's, Healthy Choice, and Banquet branded businesses also helped push earnings higher, as operating profits in this segment increased 15%. Additions such as buffalo chicken macaroni and cheese and protein-heavy Power Bowls have helped the company woo millennial consumers who are interested in convenience and healthy food.
With an earnings report like this, Conagra doesn't need a big acquisition for the future to look bright. But with synergies between Conagra and Pinnacle in many segments — especially frozen foods, for which Conagra will now be the nation's second-largest company — it is a safe bet that this kind of growth is likely to continue.