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Conagra (CAG) Braves Headwinds with Robust Growth Drivers

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On Aug 7, we issued an updated research report on premium consumer goods company – Conagra Brands, Inc. (CAG - Free Report) .  

Existing Scenario

Conagra believes that its strategy to bring down production volumes, improve pricing conditions, increase supply-chain productivity and divest low margin generating businesses will be conducive to margin growth in the quarters ahead. The company anticipates to drive its margin growth by nearly 32% by the end of fiscal 2020. In addition, factors such as increased share repurchase, margin expansion and lesser interest expense, as a result of reduced debt burden, are expected to boost earnings in the near term.
Also, Conagra encourages innovation in business for enhancing its product portfolio. The company is rolling out several on-trend products in the market through advanced innovation processes, in turn capturing higher market demand share. Stronger demand for new products launched under major brands such as Peter Pan, Healthy Choice and Alexia are anticipated to bolster Conagra’s near-term revenues.

However, we notice that over the last one month, Conagra’s shares yielded a return of 2.89%, underperforming 3.86% growth recorded by the industry.

The company intends to boost its revenues and margins through increased business internationalization. However, international operations expose it to several economic, political and environmental headwinds. In fourth-quarter fiscal 2017, foreign currency translation impact marred Conagra’s revenues by 3.5%. Currency-related headwinds might weigh over the company’s overseas market performance, moving ahead.

Additionally, we believe that headwinds such as stiff industry rivalry or input price inflation might limit near-term prospects for this Zacks Rank #3 (Hold) company.

Over the last 30 days, the Zacks Consensus Estimate for the stock remained unchanged for fiscal 2018, reflecting neutral market sentiments.

Key Picks

Some better-ranked stocks in the industry are listed below:

Nu Skin Enterprises, Inc. (NUS - Free Report) has an average positive earnings surprise of 10.83% for the last four quarters and currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The New York Times Company (NYT - Free Report) holds a Zacks Rank #2 and has an average positive earnings surprise of 43.06% for the trailing four quarters.

Inter Parfums, Inc. (IPAR - Free Report) also holds a Zacks Rank #2 and has an average positive earnings surprise of 15.58% for the past four quarters.

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