(Reuters) - Conagra Brands Inc (CAG.N), which makes Reddi-Wip whipped cream and Chef Boyardee pasta, reported a stronger-than-expected quarterly profit, as the packaged food maker’s efforts to cut back on discounts lifted margins.
Shares of the company, which also beat revenue estimates, rose 2.2 percent to $34.06 in morning trading on Thursday.
Conagra has been revamping its business that has struggled with customers move away from packaged foods and toward fresh foods that are seen as healthier.
The company has beefed up its portfolio by adding protein-rich products and food with fewer artificial ingredients, while it has exited underperforming brands and raised prices on popular products such as Banquet’s frozen meals, which were previously sold at $1.
“In what has been a very challenging environment for food manufacturers, and after General Mills disappointed last week, we think investors will see today’s results as a bit of a relief,” J.P. Morgan analyst Ken Goldman wrote in a note.
Rival General Mills (GIS.N) posted a smaller-than-expected quarterly profit last week as demand fell for its Yoplait yogurt and Fiber One cereal.
Net income attributable to Conagra fell to $152.5 million, or 37 cents per share, in the first quarter ended Aug. 27, from $186.2 million, or 42 cents per share, a year earlier.
Profit was dented as the company paid additional fees to stock its brands such as PAM and P.F. Chang’s Home Menu at more supermarkets.
Excluding one-time items, Conagra earned 46 cents per share, beating analysts’ average estimate of 40 cents, according to Thomson Reuters I/B/E/S.
The company said adjusted gross margin increased 26 basis points to 29.2 percent.
Net sales fell 4.8 percent to $1.80 billion, hurt by weak demand for Conagra’s grocery and snacks products. Analysts had expected $1.79 billion.
Reporting by Gayathree Ganesan in Bengaluru; Editing by Sai Sachin Ravikumar and Sriraj Kalluvila