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Why Did the US Department of Justice Fine ConAgra Brands?

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Price movement

ConAgra Brands (CAG) has a market cap of $16.9 billion. It fell 0.54% to close at $38.41 per share on December 13, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 2.1%, 10.0%, and 19.7%, respectively, on the same day.

CAG is trading 3.4% above its 20-day moving average, 4.1% above its 50-day moving average, and 8.0% above its 200-day moving average.

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Related ETF and peers

The iShares Russell 3000 ETF (IWV) invests 0.09% of its holdings in ConAgra Brands. The YTD price movement of IWV was 14.1% on December 13.

The market caps of ConAgra Brands’s competitors are as follows:

  • General Mills (GIS) — $38.2 billion
  • J.M. Smucker (SJM) — $15.0 billion
  • TreeHouse Foods (THS) — $4.1 billion

Latest news on ConAgra Brands

On December 13, 2016, Reuters reported, “A subsidiary of ConAgra Brands Inc was sentenced on Tuesday to pay an $8 million criminal fine and forfeit an additional $3.2 million in assets after pleading guilty to shipping contaminated peanut butter linked to a nationwide outbreak of salmonella poisoning in 2006-2007, the U.S. Justice Department said.”

The report added, “‘The sentence represents the largest fine ever paid in a food safety case,’ the Justice Department said in a statement on the sentence against ConAgra Grocery Products LLC.”

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Performance of ConAgra Foods in fiscal 1Q17

ConAgra Foods (CAG) reported fiscal 1Q17 net sales of $2.7 billion, a fall of 4.3% from its net sales of $2.8 billion in fiscal 1Q16. Sales of the Grocery & Snacks, Refrigerated & Frozen, International, Foodservice, and Commercial segments fell 5.4%, 8.1%, 5.7%, 1.0%, and 2.0%, respectively, between fiscal 1Q16 and fiscal 1Q17.

CAG’s net income and EPS (earnings per share) rose to $186.2 million and $0.42, respectively, in fiscal 1Q17, compared to -$1.2 billion and -$2.65, respectively, in fiscal 1Q16. It reported EPS from continuing operations of $0.61 in fiscal 1Q17, a rise of 48.8% compared to fiscal 1Q16.

CAG’s cash and cash equivalents fell 4.8%, and its inventories rose 3.5% between fiscal 4Q16 and fiscal 1Q17. Its current ratio rose to 1.44x, and its debt-to-equity ratio fell to 2.4x in fiscal 1Q17, compared to 1.41x and 2.5x, respectively, in fiscal 4Q16.

This is the final earnings report from ConAgra Foods due to the spin-off that will result in ConAgra Brands and Lamb Weston.

Quarterly dividend

ConAgra Brands declared a quarterly dividend of $0.20 per share on its common stock. The dividend will be paid on March 1, 2017, to shareholders of record at the close of business on January 30, 2017.

In the next part of this series, let’s discuss TreeHouse Foods (THS).

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