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Tag: Conagra Brands Inc

  • Wall Street braces for a turbulent October with jobs report on deck next week

    Wall Street braces for a turbulent October with jobs report on deck next week

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  • Wall Street could be in for another good quarter after an exuberant start to the year, history shows

    Wall Street could be in for another good quarter after an exuberant start to the year, history shows

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  • Bet against America’s love for junk food? Morgan Stanley sees tough times ahead for snack stocks like Hostess

    Bet against America’s love for junk food? Morgan Stanley sees tough times ahead for snack stocks like Hostess

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  • Want companies to lower their prices? Stop buying stuff from them.

    Want companies to lower their prices? Stop buying stuff from them.

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    The thing that will make companies lower prices is if consumers stop complaining about paying more for the things they need and want, and actually start refusing to buy them.

    As the U.S. corporate earnings-reporting season progresses, with earnings from major retailers Walmart Inc.
    WMT,
    +0.59%    ,
    Target Corp.
    TGT,
    +0.10%
    and Home Depot Inc.
    HD,
    +0.52%
    on tap next week, investors can get a ground-floor view of how consumer demand may have been hurt, or not, by higher prices, and what the companies plan to do, or not do, about it.

    This dynamic of how consumers adjust their spending habits when prices change is referred to by economists as the price elasticity of demand.

    “ For companies to cut prices, ‘you have to have the consumer go on strike, and they’re not there yet.’”


    — Jamie Cox, Harris Financial Group

    Those who trust companies will choose to ratchet down prices on their own, or at least not raise them because the rise in input costs has been slowing, haven’t been listening to what the many companies have told analysts on their post-earnings-report conference calls.

    Read: U.S. inflation eases again, PCE shows. Prices rise at slowest pace in almost two years.

    Kraft Heinz Co.
    KHC,
    +0.47%
    acknowledged after its second-quarter report that its relatively higher prices have hurt demand, but not by enough for the food and condiments company to consider cutting prices.

    Colgate-Palmolive Co.
    CL,
    +0.81%
    said it will continue to raise prices, even as inflation slows and selling volume declines, as the consumer-products company continues to be laser focused on boosting margins and profits.

    And while PepsiCo Inc.
    PEP,
    +0.16%
    was worried that elasticities would increase, given how its lower-income customers were being particularly pressured by inflation, the beverage and snack giant reported strong results as it witnessed “better elasticities” in most of the markets in which it operated.

    “Obviously, there is still carryover pricing, and I don’t think we’ll do anything different than our normal cycles on pricing in the balance of the year,” PepsiCo Chief Financial Officer Hugh Johnston told analysts, according to an AlphaSense transcript.

    Basically, as MarketWatch has reported, so-called greedflation is alive and well.

    Jamie Cox, managing partner for Harris Financial Group, said as long as the job market stays strong, as it is now, corporate greed will continue to pay off.

    “If something is more expensive, and you have a job, you’ll complain about it, but you won’t substitute it for something cheaper,” Cox said. For companies to cut prices, “you have to have the consumer go on strike, and they’re not there yet,” Cox added.

    “ ‘At some point, people are going to say, “All right — enough.” ’ ”


    — Paul Nolte, Murphy & Sylvest Wealth Management

    The reason elasticity is so important in the current environment is that, as long as consumers continue to pay the higher prices companies are charging, inflation will remain stubbornly high, making it, in turn, more likely that the Federal Reserve will continue to raise interest rates or, at the very least, not lower them.

    But the longer interest rates stay high enough to crimp economic growth, the more likely the stock market will reverse lower as recession fears rise.

    “At some point, people are going to say, ‘All right — enough,’ ” said Paul Nolte, senior wealth manager and market strategist at Murphy & Sylvest Wealth Management. “But we just haven’t seen that yet.”

    What is elasticity?

    Economists use the term “price elasticity of demand” to refer to the way in which consumers adjust their spending habits when prices change.

    “Elasticity tries to measure how much more producers will want to produce if prices rise, and how much more consumers will want to buy if prices fall,” explained Bill Adams, chief economist at Comerica.

    Elasticity often depends on the type of product a company sells.

    For example, consumer-discretionary-goods companies that sell products and services that people want will often experience greater price elasticity than consumer-staples companies that sell things that people need, such as groceries and prescription drugs.

    But even for needs, consumers often still have a choice, as less expensive generic, or private-label, alternatives may be available.

    Andre Schulten, chief financial officer of consumer-staples maker Procter & Gamble Co.
    PG,
    +0.58%    ,
    which recently beat earnings expectations as it continued to raise prices, telling analysts that, while there was “some trading into private label,” the overall market share of private-label products was unchanged for the year.

    As Harris Financial’s Cox said, consumers may be complaining about higher prices, but they aren’t yet desperate enough to stop buying.

    The Federal Reserve’s latest Beige Book economic survey stated that business contacts in some districts had observed a “reluctance” to raise prices as consumers appeared to have grown more sensitive to prices, but other districts reported “solid demand” allowed companies to maintain prices and profitability.

    That’s likely why companies and analysts have become less concerned about price elasticity. Based on a FactSet analysis, mentions of the word “elasticity” in press releases and conference calls of S&P 500 companies
    SPX
    increased as inflation and interest rates started surging in early 2022 through the end of the year.

    With inflation trends softening this year, the Fed took a brief pause in raising rates in June, helping fuel further stock-market gains, before raising rates again in July.

    Mentions of the word elasticity in earnings press releases and conference-call transcripts of S&P 500 companies.


    FactSet

    As the chart shows, “elasticity” popped up in more than 55% of earnings releases and conference calls in mid-2022, but with the second-quarter 2023 earnings-reporting season more than half over, mentions had dropped to about 20%.

    Perhaps that will pick up, as retailers, especially those catering to lower-income customers — recall the PepsiCo comment — assess the demand impact of continued price increases.

    Meanwhile, the branded-foods company Conagra Brands Inc.
    CAG,
    +0.71%    ,
    whose wide-ranging food brands including Birds Eye, Duncan Hines, Hunt’s, Orville Redenbacher’s and Slim Jim, were starting to see the emergence of a different dynamic.

    Chief Executive Sean Connolly said consumers were shifting behavior in some categories as prices remained high. Rather than trade down to lower-priced alternatives, he noticed some consumers buying fewer items overall, “more of a hunkering down than a trading down.”

    That’s exactly the kind of consumer behavior that is needed, if companies are to stop feeding into the greedflation phenomenon and to start pulling back on prices.

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  • Cramer’s week ahead: 3 events will determine if the market’s bad momentum will continue in October

    Cramer’s week ahead: 3 events will determine if the market’s bad momentum will continue in October

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    CNBC’s Jim Cramer on Friday said that three key events next week will determine if the nightmarish month for the stock market will continue into October.

    Here are the events:

    • The release of the nonfarm labor report Friday. Cramer said he expects it to show inflated hiring and wages.
    • Two speaking engagements by Cleveland Fed President Loretta Mester, who Cramer believes is the primary inflation hawk on the Federal Open Market Committee. “She wants to protect us … from high inflation, even if that means raising interest rates into a recession,” he said.

    The S&P 500 closed out its worst month since March 2020 on Friday. The Dow Jones Industrial Average and the Nasdaq Composite fell 8.8% and 10.5%, respectively, for the month.

    While it’s likely that Mester and the report will both bring bad news, investors can protect themselves from the market wreckage if they stick to a solid game plan, according to Cramer. 

    “Own high-quality companies with good balance sheets and high dividends that will benefit from a decline in inflation, because that’s what’s going to happen,” he said.

    He also previewed next week’s slate of earnings. All earnings and revenue estimates are courtesy of FactSet.

    Wednesday: Helen of Troy, Lamb Wesson

    Helen of Troy

    • Q2 2023 earnings release before the bell; conference call at 9 a.m. ET
    • Projected EPS: $2.21
    • Projected revenue: $521 million

    Lamb Weston Holdings

    • Q1 2023 earnings release at 8:30 a.m. ET; conference call at 10 a.m. ET
    • Projected EPS: 79 cents
    • Projected revenue: $1.21 billion

    “We saw this from Nike last night — all that happens is the downside gets accentuated as the upside just treads water or goes marginally higher. That’s what I expect will happen with both when they report,” Cramer said.

    Thursday: Constellation Brands, Conagra Brands, McCormick, Norwegian Cruise Line Holdings

    Constellation Brands

    • Q2 2023 earnings release at 7:30 a.m. ET; conference call at 10:30 a.m. ET
    • Projected EPS: $2.81
    • Projected revenue: $2.51 billion

    He said he expects the company’s top line to be “extraordinarily good.”

    Conagra Brands

    • Q1 2023 earnings release at 7:30 a.m. ET; conference call at 9:30 a.m. ET
    • Projected EPS: 52 cents
    • Projected revenue: $2.85 billion

    The company needs to grow its business, according to Cramer.

    McCormick

    • Q3 2022 earnings release at 6:30 a.m. ET; conference call at 8 a.m. ET
    • Projected EPS: 71 cents
    • Projected revenue: $1.6 billion

    Cramer said that the company’s earnings call will simply reinforce its preannounced weaker-than-expected third-quarter earnings and full-year outlook cut earlier this month.

    Norwegian Cruise Line

    • Investor meeting at 10 a.m. ET

    Cramer said that he expects Norwegian to be performing better than competitor Carnival, which struggled with higher costs in its latest quarter, but it’s unclear whether that will be enough to help Norwegian’s stock.

    Friday: Tilray Brands

    • Q1 2023 earnings release at 7 a.m. ET; conference call at 8:30 a.m. ET
    • Projected loss: loss of 5 cents per share
    • Projected revenue: $169 million

    He predicted that the company will make a “bold” statement about the legalization of cannabis and said he’s pondering whether this could be a great speculative stock to own during the Biden administration.

    Disclosure: Cramer’s Charitable Trust owns shares of Constellation Brands.

    Cramer's game plan for the trading week of Oct. 3

    Jim Cramer’s Guide to Investing

    Click here to download Jim Cramer’s Guide to Investing at no cost to help you build long-term wealth and invest smarter.

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