Conagra offers compelling value right now due to its return to profitability, substantial cost-cutting and supply chain transformation, market-leading dividend yield, and a strong innovation pipeline.
The stock trades at an attractive valuation of 10.9 times forward earnings, significantly below the historical average.
We feel that low valuation reflects market concerns about the company’s debt burden and operational challenges—but also presents an opportunity for investors to bet on the ongoing turnaround.
CONAGRA BRANDS INC. (New York symbol CAG; www.conagrabrands.com) makes some of North America’s most popular food brands. They include Hunt’s tomato sauce, Birds Eye frozen meals, Orville Redenbacher popcorn and Reddi-wip whipped cream.
In August 2024, the company has 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.
[ofie_ad]
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.
Meanwhile, the company has now completed the previously announced sale of its Chef Boyardee brand of ready-to-eat pasta meals. The buyer, Hometown Food Company (owned by Brynwood Partners), will let Conagra keep making Chef Boyardee frozen skillet meals under a licensing agreement. Conagra received $600 million. It will use the cash to pay down its long-term.
Conagra has a plan to offset tariffs
Conagra’s sales in its fiscal 2025 fourth quarter, ended May 25, 2025, fell 4.3%, to $2.78 billion from $2.91 billion from a year earlier. That missed the consensus forecast of $2.83 billion.
If you exclude businesses it bought and sold, as well as currency rates, Conagra’s organic sales declined 3.5%. That’s due to lower volumes (down 2.5%) and lower prices (down 1.0%).
The lower sales also cut earnings before unusual items by 8.2%, to $0.56 a share (or a total of $270.1 million) from $0.61 a share (or $293.7 million). That also missed the consensus estimate of $0.58 a share.
Tariffs are increasing Conagra’s costs for food ingredients, such as cocoa, olive oil and palm oil, as well as the steel and aluminum that it uses for packaging. However, to offset those expenses, the company plans to raise certain selling prices. It will also modernize its facilities and expand production in faster-growing categories.
Conagra expects sales in fiscal 2026 to be flat compared with 2025. Its projected earnings of between $1.70 and $1.85 a share are also below the consensus estimate of $2.18 a share. The stock trades at just 10.9 times the midpoint of that range, which is a low multiple in light of its popular brands and high market share. The $1.40 dividend still looks safe, and it yields a high 7.4%.
Recommendation in Wall Street Stock Forecaster: Conagra Brands Inc. is a buy.
