Conagra Brands, a leader in North American packaged foods continues to navigate a complex macroeconomic landscape marked by inflationary pressures, shifting consumer preferences, and operational disruptions. Recent developments highlight its efforts to streamline operations, innovate product lines, and address emerging market trends.
While near-term headwinds—including supply chain bottlenecks and foodservice softness—cloud earnings visibility, initiatives like weight-loss drug GLP-1-friendly labeling and premium collaborations suggest the firm can adapt to evolving consumer preferences.
The stock trades at 10.8 times the company’s forward earnings forecast with the low valuation, offering a solid entry point and a high dividend.
CONAGRA BRANDS INC. (New York symbol CAG; www.conagrabrands.com) makes a variety of popular foods, including Chef Boyardee canned pasta, Hunt’s tomato sauce, Orville Redenbacher popcorn and Reddi-wip whipped cream.
In August 2024, Conagra completed the sale of its 51.8% stake in Agro Tech Foods Limited. Based in India, this firm makes a variety of foods such as breakfast cereals, snacks and candies.
Conagra did not say how much it received, but earlier disclosed it expected proceeds of $78 million.
The sale lets the company focus on its main businesses in North America. A deal to license some of its brands to Agro Tech will also let it continue to benefit from rising demand for snack foods in India.
Conagra reported lower-than-expected sales and earnings for its latest quarter. That’s because cost-conscious consumers continue to switch to cheaper alternatives.
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A quality-control problem at Conagra’s main chicken-processing plant also forced it to buy meat from another supplier, which increased its costs. The company is now fixing these problems, which will let it rebuild inventories and increase shipments.
Conagra’s sales in its fiscal 2025 third quarter, ended February 23, 2025, fell 6.3%, to $2.84 billion from $3.03 billion from a year earlier. That missed the consensus forecast of $2.90 billion.
If you exclude businesses it bought and sold, as well as currency rates, Conagra’s organic sales declined 5.2%. That’s due to lower volumes (down 3.1%) and lower prices (down 2.1%).
The lower sales also cut earnings before unusual items by 26.1%, to $0.51 a share (or a total of $242.1 million) from $0.69 a share (or $328.9 million). That also missed the consensus estimate of $0.53 a share.
Conagra Brands: Innovation with GLP-1 friendly products taps into new trends
Conagra is now labelling some its high-protein, low-sodium products as GLP-1 friendly; GLP-1’s are a class of weight-loss drugs (such as Ozempic). That should help it take advantage of rising consumer demand for healthier foods.
Meanwhile, the company’s restructuring plan should cut $1 billion from its annual costs by the end of fiscal 2025.
Conagra expects its sales for all of fiscal 2025 will decline about 2.0%, which is unchanged from its previous forecast. It should also earn $2.35 a share for the full year, and the stock trades at 10.8 times that figure. That’s a low multiple in light of its popular brands and high market share. The $1.40 dividend still looks safe, and it yields a solid 5.5%.
Recommendation in Wall Street Stock Forecaster: Conagra Brands Inc. is a buy.
