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Bank of America Merrill Lynch Upgraded ConAgra Rating to ‘Buy’

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Price movement of ConAgra

ConAgra Foods (CAG) has a market cap of $18.1 billion. CAG rose by 3.3% to close at $41.60 per share as of February 12, 2016. The price movements on weekly, monthly, and year-to-date (or YTD) bases are 5.6%, 5.9%, and -0.70%, respectively.

At times, the stock has broken the support of all moving day averages. Currently, CAG is trading 4.5% above its 20-day moving average, 3.1% above its 50-day moving average, and 2.3% above its 200-day moving average.

The Consumer Staples Select Sector SPDR ETF (XLP) invests 1.2% of its holdings in ConAgra Foods. The ETF tracks a market-cap-weighted index of consumer staples stocks drawn from the S&P 500. The YTD price movement of XLP is -2.2% as of February 11, 2016.

The Vanguard Mid-Cap ETF (VO) invests 0.57% of its holdings in ConAgra Foods. The ETF tracks the CRSP US Mid Cap Index, a diversified index of mid-cap US companies.

The market cap of ConAgra’s competitors are as follows:

  • PepsiCo (PEP) — $142.4 billion
  • General Mills (GIS) — $33.8 billion
  • Pinnacle Foods (PF) — $4.7 billion
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Bank of America Merrill Lynch upgraded ConAgra Foods

Bank of America Merrill Lynch has upgraded ConAgra Foods’ rating from “neutral” to “buy” and set the price target at $46 per share.

Performance of ConAgra Foods in recent fiscal 2Q16

ConAgra Foods reported fiscal 2Q16 net sales of $3,092.7 million, a fall of 1.4% compared to net sales of $3,136.4 million in fiscal 2Q15. Sales of its consumer foods segment fell by 2.9%, and sales of its commercial foods segment rose by 1.0% in fiscal 2Q16 compared to fiscal 2Q15. The company’s cost of goods sold as a percentage of net sales and operating income fell by 3.9% and 24.2%, respectively, in fiscal 2Q16 compared to fiscal 2Q15.

Its net income and EPS (earnings per share) rose to $154.9 million and $0.35, respectively, in fiscal 2Q16, compared to $10.0 million and $0.02, respectively, in fiscal 2Q15.

Meanwhile, its cash and cash equivalents fell by 41.8%, and inventories rose by 14.8% in fiscal 2Q16 compared to fiscal 4Q15. Its long-term debt-to-equity ratio rose to 1.8 in fiscal 2Q16 compared to 1.5 in fiscal 4Q15.

The PBV (price-to-book value) and PS (price-to-sales) ratios of ConAgra Foods are 5.3x and 1.3x, respectively, as of February 12, 2016.

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