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Conagra shares crater as Pinnacle deal fails to boost growth, hurting forecast

Key Points
  • Conagra Foods shares have nosedived after the company missed revenue estimates and offered up a weak 2019 forecast.
  • The company also reported that Pinnacle Foods, its latest acquisition, missed internal targets.
  • The packaged foods company otherwise beat estimates for its quarterly earnings.
In the Pinnacle Foods deal, Conagra gained brands such as Birds Eye, Hungry-Man, Aunt Jemima Frozen Breakfast, and Armour brand frozen foods.
Daniel Acker | Bloomberg | Getty Images

Shares of Conagra Foods nosedived 17 percent Thursday, hitting a 52-week low, after the company missed revenue estimates, citing hurricane effects and higher transportation costs.

The company's stock is down 35 percent so far this year. Stocks of fellow packaged goods companies like General Mills and Kellogg's have also struggled this year, but Conagra, with a $14.1 billion market value, has experienced the biggest percentage drop. Investors have turned away from the sector as sales growth slowed.

The company's acquisition of Pinnacle Foods is expected to weigh on its earnings in coming quarters. The deal closed 31 days before quarter ended on Nov. 25. Conagra told analysts that Pinnacle's challenges are "largely self-inflicted due to subpar innovation and executional missteps." (Cambell Soup is reportedly close to naming Pinnacle's former CEO Mark Clouse as its new chief executive.)

It also said it does not expect Pinnacle's performance to improve until the second half of the fiscal year 2020 but reiterated its excitement about having its brands, which include frozen foods such as Birds Eye vegetables and Hungry-Man dinners, in the Conagra portfolio.

Conagra plans to hold an investor day on April 10 to share more information on its plans to integrate Pinnacle's business.

In fiscal second quarter,  the company said revenue rose 9.7 percent to $2.38 billion, but it missed Refinitiv estimates of $2.41 billion. On an organic basis, Conagra said sales fell 1.6 percent. Sales in the year-ago period were boosted by hurricanes, as consumers stocked up on packaged food.

It beat estimates on its bottom line, reporting earnings of 67 cents per share excluding items. Wall Street had been expecting earnings of 55 cents per share.

Conagra cut its estimate for fiscal 2019 adjusted earnings to a range of $2.03 to $2.08 per share. Analysts estimated its full year earnings at $2.11 per share.