Packaged foods company Conagra Brands (NYSE:CAG) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 1.7% year on year to $3.03 billion. It made a non-GAAP profit of $0.69 per share, down from its profit of $0.76 per share in the same quarter last year.

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Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE:CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.

Shelf-Stable Food

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Sales Growth

Conagra is one of the larger consumer staples companies and benefits from a well-known brand, giving it customer mindshare and influence over purchasing decisions.

As you can see below, the company's annualized revenue growth rate of 1.1% over the last three years was weak as consumers bought less of its products. We'll explore what this means in the "Volume Growth" section.

This quarter, Conagra reported a rather uninspiring 1.7% year-on-year revenue decline to $3.03 billion in revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.

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Volume Growth

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Conagra generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Conagra's average quarterly sales volumes have shrunk by 2.4%. This decrease isn't ideal as the quantity demanded for consumer staples products is typically stable. Luckily, Conagra was able to offset fewer customers purchasing its products by charging higher prices, enabling it to generate 3.5% average organic revenue growth. We hope the company can grow its volumes soon, however, as consistent price increases (on top of inflation) aren't sustainable over the long term unless the business is really really special.

In Conagra's Q1 2024, sales volumes dropped 1.8% year on year. This result was a step in the right direction compared to its 9% year-on-year decline 12 months ago.

Key Takeaways from Conagra's Q1 Results

We liked how Conagra beat analysts' organic revenue growth expectations this quarter. We were also excited its gross margin outperformed Wall Street's estimates. For the full year, it was comforting that organic sales guidance was maintained while operating margin guidance was raised. The CEO struck an optimistic tone in the release, saying that "Volume trends in our domestic retail business continued to improve as targeted investments, particularly in frozen, generated strong lifts and unit share gains." Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is up 6.6% after reporting and currently trades at $30.99 per share.

Conagra may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.