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Factors Making Conagra Brands (CAG) an Appetizing Stock

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Conagra Brands, Inc. (CAG - Free Report) appears in great shape. The packaged goods food company has been benefiting from its efficient pricing actions amid an inflated cost scenario.

The recovery in the foodservice business and strength in the frozen business have also been working well for this Zacks Rank #2 (Buy) company. These upsides were visible in the first quarter of fiscal 2023, wherein the top and bottom lines increased year over year and beat the Zacks Consensus Estimate.

Shares of CAG have risen 5.6% in the past three months compared with the industry’s growth of 3.4%. The Zacks Consensus Estimate for fiscal 2023 earnings per share (EPS) has risen by a penny to $2.44 over the past seven days. Let’s delve deeper.

Conagra Brands Price, Consensus and EPS Surprise

Conagra Brands Price, Consensus and EPS Surprise

Conagra Brands price-consensus-eps-surprise-chart | Conagra Brands Quote

Factors Acting as Upsides

Conagra’s efficient pricing initiatives have been offering respite amid cost headwinds. In the first quarter of fiscal 2023, the price/mix improved by 14.3% and aided the organic sales growth of 9.7%. The favorable price/mix was backed by the company’s inflation-induced pricing actions. The price/ mix rose 16.6%, 12.1%, 8.4% and 18.8% in the Grocery & Snacks, Refrigerated & Frozen, and International and Foodservice segments, respectively.

During the quarter, Conagra generated net sales of $2,904.3 million, which advanced 9.5% year over year. The figure surpassed the Zacks Consensus Estimate of $2,830.7 million. The year-over-year sales increase was the result of higher organic sales. CAG’s quarterly adjusted EPS came in at 57 cents, beating the Zacks Consensus Estimate of 52 cents. The bottom line increased 14% year over year.

The increase in the bottom line can be attributed to the solid gross profit and the impressive performance of the company’s Ardent Mills joint venture. Conagra continues to focus on its pricing actions as the inflationary environment is likely to persist in fiscal 2023.

To counter inflation, management unveiled an additional price increase, which will be effective in the second quarter of fiscal 2023. We believe that efficient pricing, together with innovation, is likely to aid sales in fiscal 2023.

Prudent innovations have been helping the company modernize its portfolio and meet consumers’ changing needs aptly. Some of the company’s new products have been top-performing in several categories, such as toppings, plant-based protein and single-serve meals. Conagra earlier said that it expects a sturdy performance from innovations in fiscal 2023.

Conagra is seeing recovery in its Foodservice business as restaurant traffic is picking up with pandemic-led curbs being lifted and rising outdoor movement. In the first quarter of fiscal 2023, the Foodservice segment’s sales advanced 14.6% to $274.9 million. The price/mix improved 18.8% on favorable inflation-driven pricing. With a continued rise in outdoor dining trends, the foodservice business looks well-placed.

Conagra’s frozen and snacks categories remained particularly strong in the first quarter of fiscal 2023, delivering solid profit growth. Net sales grew 9.6% to $1,207.6 million in the Refrigerated and Frozen segment. Organic sales also rose 9.6% on a price/mix increase of 12.1%. The company saw an improved share in frozen single-serve meals, plant-based protein and frozen breakfast.

The abovementioned upsides are likely to keep Conagra Brands on the growth trajectory. For fiscal 2023, the company’s organic net sales are anticipated to rise 4-5% year over year. The adjusted operating margin is anticipated to be nearly 15%. Adjusted EPS growth is envisioned at 1-5%.

Looking for Other Consumer Staple Stocks? Check These

Some other top-ranked stocks from the sector are Lamb Weston (LW - Free Report) , General Mills (GIS - Free Report) and The J. M. Smucker Company (SJM - Free Report)

Lamb Weston, a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 14.6% and 45.7%, respectively, from the year-ago reported numbers.

General Mills, which manufactures and markets branded consumer foods, carries a Zacks Rank #2 at present. General Mills has a trailing four-quarter earnings surprise of 20.8%, on average.

The Zacks Consensus Estimate for GIS’ current financial-year sales suggests growth of 4.6% from the year-ago reported number.

The J. M. Smucker, which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 18.5%, on average.

The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year sales suggests growth of 5.6% from the corresponding year-ago reported figures.


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General Mills, Inc. (GIS) - free report >>

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The J. M. Smucker Company (SJM) - free report >>

Lamb Weston (LW) - free report >>

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