Conagra Brands owns some of the best-known brands in the industry, which should help it pass along its rising costs to consumers.
Those strong brands have ensured that higher prices have not significantly hurt its volumes. The company is also improving its efficiency, which helps support what appears to be a safe, sustainable dividend.
The stock trades at 10.8 times the company’s 2024 earnings forecast.
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CONAGRA BRANDS INC. (New York symbol CAG; www.conagra.com) is the maker of some of North America’s most popular food brands. They include Chef Boyardee canned pasta, Hunt’s tomato sauce, Birds Eye frozen meals, Orville Redenbacher popcorn and Reddi-wip whipped cream.
About 82% of its brands are either #1 or #2 in their niche markets.
Conagra has four main businesses: Grocery & Snacks (41% of fiscal 2023 sales, 69% of earnings); Refrigerated & Frozen (42%, 17%); International (8%, 8%); and Foodservice (9%, 6%).
Walmart is its biggest single customer, accounting for 28% of sales in fiscal 2023.
Value Stocks: Conagra Brands’ earnings beat estimates despite a decline
The company’s sales in its fiscal 2024 second quarter, ended November 26, 2023, fell 3.2%, to $3.21 billion from $3.31 billion from a year earlier. That missed the consensus forecast of $3.23 billion.
If you exclude businesses it bought and sold, as well as currency rates, Conagra’s organic sales declined 3.4%. That’s due to lower prices (down 0.5%) and a 2.9% drop in volumes.
The lower sales also cut earnings before unusual items in the quarter by 12.3%, to $0.71 a share (or a total of $341.4 million) from $0.81 a share (or $391.8 million). Even so, that topped the consensus estimate of $0.68 a share.
For all fiscal 2024, Conagra now expects its sales will decline between 1% and 2% compared to 2023. That’s because cost-conscious consumers are cutting their spending on packaged foods.
The company also cut its earnings forecast for the full year, to between $2.60 and $2.65 a share from its earlier prediction of $2.70 to $2.75 a share. The stock trades at a moderate 10.8 times the midpoint of that new range.
Conagra’s long-term outlook remains bright, particularly as its new frozen products gain market share. Its input costs should also come down as inflation eases. Moreover, the $1.40 dividend look safe, and yields an impressive 5.0%.
Recommendation in Wall Street Stock Forecaster: Conagra Brands Inc. is a buy.
