Please ensure Javascript is enabled for purposes of website accessibility

How Conagra Improved Its Future Outlook Through the Pandemic

By Rhian Hunt – Sep 20, 2020 at 4:41PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The snack food maker may be more than a light tidbit for investors.

Century-old packaged foods company Conagra Brands (CAG -1.89%) saw its share prices collapse alongside the rest of the market as the COVID-19 pandemic erupted across the USA in March. However, as people responded to the coronavirus' spread by stockpiling staples, sales for the week ending March 29 exploded 30.9%.

This sharp ascent was the start of Conagra's vigorous rebound. By mid-April, Conagra's shares traded at their pre-coronavirus levels. Its stock resumed climbing in July, peaking in late August at $38.26, the highest in two years.

Consumer staples in jars on supermarket shelves.

Image source: Getty Images.

Data presented during Conagra's Q4 2020 earnings report and associated conference call on June 30 supports a bullish picture of the company's prospects. Organic net sales grew 22% year over year, while investors chowed down on adjusted quarterly EPS of $0.75, a 108.3% jump from fiscal Q4 2019's $0.36 adjusted EPS. Whole-year adjusted EPS rose 13.4%.

Conagra's full-year $1.47 free cash flow outperformed expectations. Using the windfall to deleverage, it took $271 million off total debt and wiped away $725 million in net debt, cutting its leverage ratio to 4.0 from the previous 4.8. The company's guidance states that the ratio should fall to approximately 3.5 to 3.6 by fiscal 2021's end. It also expects Q1 2021 organic net sales to climb 10% to 13%, and $0.54 to $0.59 adjusted EPS.

While the strongest part of the COVID-19 spike may be over, Conagra definitely improved its outlook. With less leverage, plenty of cash, ongoing organic sales strength, and "strong growth in e-commerce continued to accelerate both on an absolute basis and as a percentage of our overall sales," the results support CEO Sean Connolly's statement that Conagra's "portfolio is optimally positioned to succeed in the new normal."

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Conagra Brands, Inc. Stock Quote
Conagra Brands, Inc.
CAG
$32.63 (-1.89%) $0.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.