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Conagra Brands (CAG) Poised to Grow on Robust Prospects


On Apr 18, we issued an updated research report on premium consumer goods company Conagra Brands, Inc. CAG.

Over the last three months, shares of this Zacks Rank #2 (Buy) stock yielded a return of 4.55%, outperforming 0.45% growth recorded by the Zacks categorized Food-Miscellaneous industry. Notably, the attractiveness of this stock as a current investment choice is further accentuated by its favorable Momentum Style Score ‘B’.

Inside Story

Conagra consistently restructures its product portfolio through disciplined mergers and acquisitions, and major divestitures. For instance, the strategic buyouts of the fast growing meat snack brand, Duke’s (under Thanasi Foods LLC), and premium seed snacks making brand, BIGS (owned by BIGS LLC), are likely to bolster the company’s revenues in the quarters ahead. Conagra intends to close the BIGS and Duke’s buyout deal by this summer.

In addition, the company has been widening its margins and boosting profitability for the past few quarters. Conagra’s adjusted earnings in third-quarter fiscal 2017 (ended Feb 28, 2017) surpassed the Zacks Consensus Estimate by 6.7% and the prior-year tally by 37.1%. The upside was stemmed by margin expansion, reduced selling, general, and administrative (SG&A) expenses, lower interest expense as a result of reduced debt burden, and higher profitability accrued from the Ardent Mills joint-venture business.

Conagra believes that the above mentioned aspects would continue to bolster its bottom line in the near term. The company currently anticipates accruing earnings at the higher end of the previously estimated range of $1.65–$1.70 per share.

Conagra introduces several on-trend products in the market through advanced innovation processes and in turn, captures higher market demand share. Three fresh organic tomato offerings from Peter Pan, Simply Ground and Hunt, Healthy Choice Café Streamers organic entrees, as well as the new category of Alexia branded products, are some of the products launched by Conagra in fiscal 2016. Additionally, the company noted that it would roll out more products in the market by early fiscal 2018. Higher sales of these products would be conducive to the company’s bottom-line growth moving ahead.

The company is highly committed toward its shareholders, and intends to boost their value through lucrative share repurchase and dividend offers.

Other Stocks to Consider

Some other similarly-ranked stocks in the industry are listed below:

Blue Buffalo Pet Products, Inc. BUFF has an average earnings surprise of 6.83% for the last four quarters. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here

Energizer Holdings, Inc. ENR generated an average earnings surprise of 20.50% in the trailing four quarters.

Meredith Corporation MDP has an average earnings surprise of 7.62% for the past four quarters.

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