Conagra (CAG) To Post Q2 Earnings: What's In The Offing?

Conagra Brands, Inc. (NYSE:CAG) is scheduled to release second-quarter fiscal 2020 results on Dec 19, before market open. Notably, the company delivered positive earnings surprise of 10.3% in the last reported quarter. Also, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average being 6%.

The Zacks Consensus Estimate for second-quarter earnings is pegged at 57 cents per share, which indicates 14.9% decline from the year-ago quarter’s reported figure. Notably, the consensus mark has moved down by a couple of cents in the past 30 days. The consensus mark for revenues is at $2.82 billion, which suggests 18.1% rise from the year-ago quarter’s reported figure.

Key Factors

Conagra has been focusing on innovations and brand-building to strengthen its frozen and snacking businesses. Toward this end, the buyout of Pinnacle Foods (concluded in October 2018) has been driving the top line as witnessed in first-quarter fiscal 2019.

This apart, management in its last earnings call stated that the company made significant investments to support promotional activity for Hunt's and Chef Boyardee brands in the beginning of fiscal second quarter. This is likely to have to have contributed to the top line in the quarter under review.

New innovations and products, especially in Foodservice segment, that were likely to be introduced in fiscal second quarter are expected to have driven the company’s sales. For instance, Conagra expects Gardein brand to have delivered strong performance on the back of product introductions during the quarter to be reported.

However, costs related to the aforementioned investments are likely to have reflected on gross margin in fiscal second quarter. Management expects gross margin to decline sequentially in the quarter under review. Also, input cost inflation are a concern.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Conagra this season/time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Conagra carries a Zacks Rank #4 (Sell) and an Earnings ESP of +0.47%.

Stocks With Favorable Combination

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

CarMax (NYSE:KMX) currently has an Earnings ESP of +0.21% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

General Mills (NYSE:GIS) has an Earnings ESP of +0.19% and a Zacks Rank #3 at present.

Amazon.com (NASDAQ:AMZN) currently has an Earnings ESP of +1.95% and a Zacks Rank of 3.

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