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Conagra Brands (NYSE: CAG) is a consumer staples company that produces branded food products. Its stock has not appreciated much in 2024, only up 1.7%. It is underperforming the broad market and its sector. XLP, the Consumer Staples Select Sector SPDR Fund, is up 9.5% on the year.

The firm reported Q4 and full fiscal year 2024 financial results on June 11, 2024. We’ll review Conagra's operations, then examine this new financial report and provide some outlook and data on analysts’ expectations going forward.

Conagra Brands' Segment Breakdown: Dependence on Grocery & Snacks

Conagra operates in four reportable segments: Grocery & Snacks, Refrigerated & Frozen International, Foodservice, and International. The Grocery & Snacks segment includes shelf-stable branded food products, which made up 41% of net sales in 2024. Refrigerated & Frozen includes branded temperature-controlled products, which comprised 40% of net sales. Products in these two segments are sold through retail channels.

Foodservice includes customized food products, including meals, sauces, and other culinary items. It comprised 10% of net sales. The international segment sells all these product types listed above to customers outside the United States. It made up 9% of net sales.

Although the company’s net sales make it look somewhat diversified across its segments, the firm is heavily reliant on the Grocery & Snacks segment for profit. The segment accounted for 86% of operating income in 2024, while Refrigerated & Frozen reported a loss.

Well-known brands under Conagra’s control include Marie Callender’s, Reddi-wip, and Slim Jim. Some of the company’s largest competitors include Kraft Heinz (NASDAQ: KHC) and PepsiCo (NASDAQ: PEP).

Conagra Beats Earnings Expectations but Faces Revenue Decline in Key Segments

The firm beat analysts’ expectations on adjusted earnings per share by four cents, coming in at $0.61. However, revenue declined further than expected, down to $2.91 billion, compared to the consensus of $2.93. This drop in revenue was primarily due to declines in the firm’s largest segments.

Grocery and Snacks fell 2.1%, while Refrigerated and Frozen fell 3.8%. The only revenue increase came in international, rising 6.4%. Overall, the firm showed a yearly drop in organic net sales of 2.4% for the quarter and 2.1% for the full year. This number came in under the firm's guidance range of a drop between 1% and 2%.

The firm has increased its margins significantly over the past two years. Adjusted gross margin has grown 284 basis points, and adjusted operating margin is up 160 basis points.

The company’s sales benefited from a price/mix increase in the Grocery and Snacks segment. However, typical of other firms in the consumer staples sector recently, this was more than offset by a volume decrease. The opposite was true in the refrigerated and frozen segment, which saw a price/mix decrease of 4.6% and a volume increase of 0.9%. Growth in single-serve meal volumes drove this. The company now holds a volume market share of 52% in that category.

The firm also announced its dividend of $1.40 per share. This gives it an expected dividend yield of 5.0% over the next 12 months, the highest among large-cap food products firms globally. The average yield among these firms is 2%.

Conagra Guidance and Analyst Price Target Changes

The company provided guidance for the 2025 fiscal year, projecting an organic net sales decrease of 1.5% to 0%. It believes it will be able to offset more than expected inflation in costs of goods sold, keeping gross margins stable. However, it sees adjusted operating margin declining 20 to 40 basis points from its current level of 16%. It projects adjusted EPS to range between $2.60 and $2.65. Analysts anticipated this number to be $2.69.

On the day of the release, the share price fell by 1.5%. Shares did face some volatility, falling as much as 4.7% from the previous close.

Overall, persistent inflation is still weighing on consumer staples firms. Customers are currently adjusting to higher price levels, so it may be several quarters until volumes begin to rise broadly.

The following day, analysts lowered their price targets broadly. Nine analysts updated their forecasts after the release. They decreased their price targets by an average of $1.90. The average target of those analysts now sits at $29.67, implying an upside of under 5%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.