01 April 2020

Conagra Serves Up Surprising Hot Stock Surge

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What’s happening: Conagra Brands reported weaker-than-expected results for its fiscal third quarter on Tuesday.

What happened: Shares of Conagra Brands surged 4% to close trading at $29.34 on Tuesday, even as the Chicago-based food company missed expectations for both sales and earnings for its fiscal third quarter. Investors ignored the miss and chose to focus on the company’s sales prospects for the current quarter and the rest of the year.

  • Conagra reported third-quarter net income of $204.4 million, or 42 cents per share, down from $242.0 million, or 50 cents per share, in the same quarter in the previous year.
  • Adjusted earnings came in at 47 cents per share, missing the consensus estimate of 49 cents a share.
  • Sales slipped 5.6% to $2.56 billion and came in short of expectations of $2.58 billion.

Why it matters: Conagra is witnessing a sharp rise in demand for its packaged products as consumers continue to stockpile groceries and snacks amid coronavirus-led lockdowns. Sales of the company’s canned pasta grew 4.5% in the last five weeks of the reported quarter and the growth trend has continued in the first week of the current quarter, with stay-at-home orders across the US due to the COVID-19 outbreak.

“On a quarter-to-date basis, shipments and consumption in our domestic retail business have increased approximately 50%, which have more than offset the impact of worsening trends in our foodservice business,” Conagra Brands’ President and CEO Sean Connolly said in a statement.

Conagra expects the growth momentum to continue and said it is adjusting its supply chain to meet the surge in demand. The company said it expects to exceed its full-year guidance for both sales and profits, provided there are no supply chain disruptions. Conagra said net sales could exceed its earlier projection of 10%-10.5% growth and adjusted earnings are likely to surpass its forecast of $2.00 to $2.07 per share.

What to watch: With Conagra issuing a strong forecast at a time of uncertainty, investors will look out for any news related to its supply chain initiatives to meet growing demand. Markets expect the growth momentum to continue, with President Donald Trump extending the nationwide social distancing guidelines to April 30.

The Markets Today

     

European stocks will be in focus today, ahead of some major economic reports scheduled for release later in the day.

Context: European markets closed higher on Tuesday, as positive manufacturing data from China lifted market sentiment. However, the region’s stocks recorded their worst quarter since 2002 due to the coronavirus outbreak and fears of a recession.

Details: European stocks were lifted by strong data from China showing an upbeat reading of the country’s official manufacturing PMI (Purchasing Managers’ Index). China’s official manufacturing PMI surged to 52.0 for March, beating expectations of a 45 reading.

The pan-European Stoxx 600 index rose 1.5%, even after losing some previous gains. Travel and leisure stocks were the top performers, which gained 4.9% on Tuesday. The index has declined 23.1% for the trading quarter, delivering its worst first quarter on record. During the quarter, the FTSE 100 and German 30 shed around 25%, while Italy’s FTSE MIB lost 28%.

Coronavirus continues to dominate investor sentiment, with the US now leading in the number of cases. Total confirmed cases in Italy have surpassed 105,700, while Spain has confirmed more than 95,900 COVID-19 cases.

Shares of German company HelloFresh jumped 13% with the meal delivery firm benefitting from the widespread lockdowns.

Investor sentiment was also boosted by Spain reporting GDP growth of 0.4% for the fourth quarter, although France said its annual consumer price index had declined 0.7% in March.

What to watch: Investors are hoping for a decline in coronavirus cases and positive readings from the EU’s economic reports. Markets await a basket of reports from the region, including the manufacturing PMI and unemployment rate. The IHS Markit Eurozone Manufacturing PMI is expected to fall to 44.7 in March, from 49.2 in February. Eurozone’s seasonally-adjusted unemployment rate is expected to remain unchanged at 7.4% in February. Various nations of the Eurozone will also be reporting some important reports today.

Other Markets: US indices closed lower on Tuesday, with the Dow, S&P 500 and Nasdaq 100 down 1.84%, 1.6%, and 0.95%, respectively.

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What else to watch today

     

Turkey’s manufacturing PMI, Spain’s manufacturing PMI and new car sales, Italy’s manufacturing PMI and unemployment rate, France’s manufacturing PMI, Germany’s manufacturing PMI, UK’s manufacturing PMI, Brazil’s industrial production, manufacturing PMI and balance of trade, Mexico’s business confidence and manufacturing PMI, Russia’s GDP, Canada’s manufacturing PMI as well as the US MBA mortgage applications, ADP employment change, manufacturing PMI, ISM manufacturing PMI, construction spending and crude oil stocks change.

 

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