What happened
Shares of Conagra Brands (CAG -2.30%) climbed 18.6% in December, according to data from S&P Global Market Intelligence, after the packaged foods company announced stronger-than-expected fiscal second-quarter 2020 results.
To be sure, virtually all of Conagra's rise last month came with a 19% pop on Dec. 19, 2019 -- the first trading day after its quarterly update hit the wires.
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So what
Conagra's headline numbers were solid; quarterly revenue rose 18.3% year over year to $2.82 billion, translating to an 8.3% increase in adjusted net income to $306 million, or $0.63 per share. Analysts, on average, were looking for adjusted earnings closer to $0.57 per share on revenue of $2.80 billion.
To be fair, that growth was entirely driven by a 19.6% contribution from Conagra's $11 billion acquisition of Pinnacle Foods last year. Meanwhile, the company saw a 2.9% headwind from divestitures that more than offset a 1.6% increase in organic net sales.
Still, Conagra CEO Sean Connolly credited the company's "solid execution" of its "Conagra Way" strategic plan, adding:
We maintained our strong momentum in frozen and snacks. We also made good progress on our large grocery brands, Hunt's and Chef Boyardee, both of which made sequential improvements. We also continued to make very good progress on the Pinnacle integration, and we remain squarely on-track with our plans to improve key Pinnacle brands.
Now what
Looking ahead to the full fiscal-year 2020, Conagra told investors to expect reported net sales growth of 12.4% to 12.9% -- even the low end of which exceeded estimates at the time by around 10 basis points -- assuming organic sales growth of 1% to 1.5%.
Keep in mind, however, that there may be room for Conagra to modestly reduce that reported sales outlook in the coming months. Subsequent to the end of the quarter, Conagra also announced it has completed the divestiture of its Lender's Bagel business to Bimbo Bakeries USA.
But this only marks a continuation of Conagra's strategic efforts to trim noncore businesses so it can better focus on fostering its most promising brands. And it's no surprise to see this consumer staples stock still hovering near its 52-week high today.
