Conagra Sees Positive Outlook as Price Increases Drive Revenue Growth

Conagra is a food company with a long history of success. Its products are enjoyed by people all over the world, and its stock is a popular choice for investors. Conagra's share price has been on the rise lately, and it is currently trading at around $2.63 per share.

Brands Inc. is expecting higher sales and earnings for fiscal 2023 after continuing to raise prices in order to stave off inflation and supply-chain pressures.

The maker of Healthy Choice frozen meals and Slim Jim meat sticks, based in Chicago, said that revenue rose by 8.3% to $3.31 billion in the quarter that ended on Nov. 27. This was thanks to both price increases and a change in the mix of products that were sold.

Sales volumes fell 8.4% as customers balked at the price hikes, though Conagra said the elasticity of its pricing during the quarter was more favorable than expected.

Conagra has revised its forecast for fiscal 2023, now expecting annual sales to increase by 7-8%. This is up from the previous forecast of 4-5% growth. Adjusted earnings are now projected to increase by at least 10%. This is a significant improvement from the previous guidance, which pointed to earnings rising by 1-5%.

Food inflation was running at a multidecade high in 2022 as companies looked to pass steep cost increases to a customer base that curbed discretionary purchases and became more budget-conscious than it was during the pandemic. This inflationary pressure was exacerbated by the fact that many consumers were still unemployed or underemployed, and therefore had less money to spend on non-essential items.

Food producers saw their top lines grow throughout the year, but often at the expense of volumes and earnings. They faced mounting costs for labor, transportation, and raw materials.

Some of the costs associated with food production are starting to moderate as supply chains normalize across the industry. Conagra has said that it expects transportation and raw-material costs to come down in the months ahead.

The company said Thursday that it was continuing to work against inflated input costs, but noted that its margins had improved thanks to higher organic sales and increased productivity. It also reported a significant jump in corporate expenses, up 80% year over year to $107 million, after it increased its incentive compensation.

Conagra's quarterly profit rose by more than a third to $381.9 million, or 79 cents a share. Excluding one-time items, adjusted earnings were 81 cents a share, exceeding analysts' expectations of 66 cents a share, according to FactSet.

Sales from the company’s frozen and refrigerated foods business increased by 10.5% to reach $1.4 billion in the quarter. The company’s snacks segment also grew by 6.8% to reach $1.3 billion. The company attributed its success in both categories to products such as microwave popcorn, frozen breakfast, and plant-based protein.

Supermarkets and packaged-food companies usually see an increase in consumer spending during economic downturns, as people cut back on eating out at restaurants, according to the company's CEO.

Stock prices rose 3% to $39.83 in premarket trading.