Conagra Brands Inc. (NYSE:CAG) is poised to report its second-quarter financial results after an impressive 2020 that saw it recoup losses accrued in the first half of the year. The company confirming a quarterly dividend of $0.275 a share to be paid in March all but underscores resiliency in the core business and free cash flow.
Conagra Brands Resiliency
The leading branded food companies had an impressive 2020 attributed to among other things increased innovation and brand building. Conagra Brands has been aggressive in boosting its frozen and snacks business that is benefiting from increased at-home consumption in the aftermath of the pandemic.
In the second-quarter, Conagra Brands is believed to have benefited from coronavirus-led stock-pilling that saw higher at-home consumption. Likewise, the company is expected to report better than expected quarterly results.
Increased at-home consumption of snacks is helping offset softness in the foodservice segment which has come under pressure amid sluggish away-from-home demand owing to the pandemic. Likewise, the company remains well-positioned to the bottom line as was the case in the first quarter.
Similarly, higher organic sales are expected thanks to higher at-home consumption amid the pandemic. Demand for frozen food is also believed to have edged higher in the second quarter as consumers stocked up to eat at home amid the pandemic. Conagra Brands management expects at-home eating trends to stay high for a while until the COVID-19 situation subsides.
Q2 Estimates
Organic sales in the second quarter are expected to increase by between 6% and 8%. Operating margin on the other hand is expected to be between 18-18.5% with adjusted earnings per share of between 70 cents and 74 cents.
While the coronavirus is expected to have boosted the retail business in the second quarter, it is also expected to have dealt a blow to the Foodservice segment. In the first quarter, sales in the segment were down 21.8% to $195.1 million. Q2 earnings outcome will have a significant impact on trader’s sentiments conversely influence Conagra Brands direction of trade.