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Conagra Brands’ Fiscal 3Q17 Earnings: A Mixed Bag

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Part 6
Conagra Brands’ Fiscal 3Q17 Earnings: A Mixed Bag PART 6 OF 7

Why Analysts Remain Upbeat on Conagra

Ratings summary and target price

As you can see in the graph below, Conagra Brands stock is covered by 14 Wall Street analysts. They’ve rated the company a 2.3 on a scale of 1.0 (“strong buy”) to 5.0 (“strong sell”). About 64.0% of those analysts have recommended a “buy” for the stock, and 29.0% have recommended a “hold.” Only one analyst has recommended a “sell.”

Why Analysts Remain Upbeat on Conagra

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On March 24, 2017, Conagra Brands was trading at $40.47, which is about 3.0% below its 52-week high. The company has risen 2.3% year-to-date. Wall Street analysts expect Conagra stock to rise about 6.0% to $42.79 over the next 12 months.

Initiatives and headwinds

Conagra Brands is in the midst of a major overhaul. The company has taken numerous measures to reinvent its portfolio and build a high-quality revenue base. That includes optimizing pricing and improving trade promotion productivity.

Demand-driven innovation and strategic acquisitions have led to a strong, innovative product pipeline, which the company expects to start shipping by the beginning of this summer. All these measures are expected to improve its sales performance.

Also, Conagra’s focus on lean structure, productivity savings, and cost reductions are leading to higher margins. However, the processed and packaged food industry as a whole is witnessing macro headwinds coupled with a demand shift toward fresh foods, which is likely to remain a drag.

You can get indirect exposure to Conagra Brands through ETFs such as the Consumer Staples Select Sector SPDR ETF (XLP), which invests 1.0% of its portfolio in the company.

Recent analyst activity

On March 21, 2017, Sanford C. Bernstein downgraded Conagra Brands to “underperform” from its earlier “market perform” rating. On February 15, 2017, Deutsche Bank initiated coverage on the company with a “buy” rating. On January 11, 2017, Citigroup upgraded the stock to a “buy” from its earlier “neutral” rating.

Peer comparison

Of the 19 analysts covering General Mills (GIS), 11.0% have recommended a “buy” for the stock. About 68.0% of them have recommended a “hold,” and 21.0% have rated it a “sell.”

Of the 17 analysts covering Pinnacle Foods (PF), 88.0% have rated the stock a “buy,” while 12.0% have rated it a “hold.” None of the analysts have rated it a “sell.”

For JM Smucker (SJM), 25.0% of the 20 analysts covering the stock have rated it a “buy.” About 65.0% have rated it a “hold,” and 10.0% have rated it a “sell.”

Of the 15 analysts covering TreeHouse Foods (THS), 73.0% have rated the stock a “buy,” while 20.0% have rated it a “hold.” About 7.0% have rated it a “sell.”

For McCormick (MKC), 23.0% have rated the stock a “buy,” and 62.0% have rated it a “hold.” About 15.0% have rated it a “sell.”

In the next and final part of this series, we’ll take a look at Conagra’s valuation.

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