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Conagra Exceeds Expectations With Positive Earnings; Shares Rise 4%

Conagra Brands Inc. (CAG) reported positive fourth-quarter earnings yesterday, beating analyst estimates with earnings of 75 cents per share on revenue of $3.29 billion.

The stock was up 4% at $35.17 per share as of market close on Tuesday.

The food producer beat forecasts of 51 cents on revenue of $3.13 billion, highlighting fourth-quarter net sales that showed a rise of 25.8%, and a 21.5% increase in organic sales with double-digit growth in each of the company’s retail segments. The earnings announcement showed expansion in organic net sales that was driven by a 21.0% boost in volume primarily by consumers increasing their at-home food consumption as a result of the COVID-19 pandemic. Gross profit grew 30.3% to $923 million in the quarter also due to rising sales volume.

“Our business clearly benefited from increased at-home eating in the fourth quarter, as the elevated retail demand outweighed the reduced foodservice demand,” said Conagra President and CEO Sean Connolly on June 30. He added, “While we are optimistic about the long-term implications of recent consumer behavior shifts, given COVID-19 uncertainties, we are only providing guidance for the first quarter of fiscal 2021.”

Jefferies analyst Robert Dickerson noted, “If management executes on the cost side, drives top-line growth via innovation, and delivers appropriately, additional valuation expansion could very well be in the cards.” He upgraded his rating on June 30, from Hold to Buy with a price target of $41 per share. His price target suggests 17% further growth lies ahead for the coming months.

Additionally, J.P. Morgan analyst Kenneth Goldman maintained his rating yesterday of Buy with a price target of $40 per share implying upside potential of 14%.

Conagra’s stock is up 2.72% year-to-date with a Moderate Buy analyst consensus that breaks down into 4 Buy ratings versus 6 Hold ratings and no Sell ratings. The average analyst price target stands at $36.13 (3% upside potential). (See Conagra’s stock analysis on TipRanks).

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Avi Natan
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