- Conagra Brands reported fiscal second-quarter 2020 earnings Thursday that beat Wall Street's expectations.
- Shares surged Thursday and closed 16% higher.
- Strength in sales of plant-based meat brand Gardein and frozen foods brands such as Healthy Choice, Birds Eye, and Marie Callender's drove the earnings beat.
- Watch Conagra trade live on Markets Insider.
Conagra Brands - the parent company of Pinnacle, Chef Boyardee, and Gardein - surged Thursday after reporting fiscal second-quarter 2020 results that exceeded Wall Street's expectations.
Shares of the packaged food company ended Thursday 16% higher, showing that investors are gaining confidence in the company's turnaround to appeal to shifting consumer taste.
Here's what the company reported, versus what analysts at Bloomberg expected:
- Adjusted earnings per share: $0.63 reported versus $0.57 (expected)
- Revenue: $2.82 billion reported versus $2.80 billion (expected)
It's the first time that Conagra Brands' acquisition of Pinnacle, which it purchased for $8.2 billion in June 2018, has shown signs of promise. In the second quarter, gross profit jumped 17.8% to $789 million, driven by the addition of Pinnacle and cost synergies from the deal, the company said in a press release.
By buying Pinnacle, Conagra added lines such as Birds Eye frozen vegetables and Gardein, a plant-based meat brand that competes with Beyond Meat and Impossible Foods.
Gardein saw "strong growth" in the second quarter, Sean Connolly, Conagra Brands chief executive officer said on an earnings call Thursday. The boost came after the company started to expand distribution for Gardein's broad range of offerings, Connolly said.
"We continue to see great opportunity for this brand going forward," Connolly said.
Refrigerated and frozen food sales were also a bright spot in the quarter for the business. Net sales for the segment increased 28.8% to $1.2 billion in the quarter, with the acquisition of Pinnacle driving important sales growth. Brands such as Birds Eye, Healthy Choice, and Marie Callender's also saw sales growth.
Conagra also saw strength in snacks, where net sales were up 14.2% to $1.1 billion in the quarter driven by brands such as Slim Jim, Snack Pack, Swiss Miss, and more.
The company updated its fiscal 2020 guidance to reflect the divestiture of its DSD snacks business, and its selling of a peanut butter business.
Analysts at UBS and Evercore ISI increased their price targets for the company after the results. Conagra Brands now has a consensus price target of $33.91 and 11 "buy" ratings, six "hold" ratings, and one "sell" rating, according to Bloomberg data.
Conagra Brands was up roughly 58% year-to-date through Thursday's close.
