Bank of America Securities analyst Peter Galbo reiterated a Hold rating on Conagra Brands (CAG – Research Report) today and set a price target of $30.00.
Peter Galbo decided to give Conagra Brands a Hold rating due to a combination of factors. Firstly, he observed that Conagra Brands’ volume is falling short of initial expectations. Consequently, the company plans to increase its trade and merchandising spend beyond what was originally planned. This move, while potentially helpful, could create a general overhang for Conagra Brands and other food stocks as the market evaluates the possibility of further trade increases.
In addition to these concerns, Galbo also noted that Conagra Brands has kept its FY24 guidance unchanged despite reducing 2Q consensus estimates. His lowered EPS estimate stems from reduced organic sales growth, even though 4Q volumes are expected to increase due to easy comparisons with the prior year. Galbo also mentioned that Conagra Brands’ revenues are expected to decline in 2Q, but positive volumes are anticipated in 2H due to increased investments. Despite these challenges, Galbo has maintained a Neutral rating but has reduced the price objective to $30 from $33. This is due to Conagra Brands’ elevated leverage compared to its peer group and higher portfolio elasticity, offset by gross margin expansion as pricing more than offsets inflation.
In another report released today, Stifel Nicolaus also maintained a Hold rating on the stock with a $29.00 price target.
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Conagra Brands (CAG) Company Description:
Conagra Brands, Inc. engages in the manufacture and sale of processed and packaged foods. It operates through the following segments: Grocery and Snacks; Refrigerated and Frozen; International; Foodservice; and Pinnacle Foods. The Grocery and Snacks segment includes branded, shelf stable food products sold in various retail channels in the United States. The Refrigerated and Frozen segment comprises branded, temperature controlled food products sold in various retail channels in the United States. The International segment consists branded food products, in various temperature states, sold in various retail and foodservice channels outside of the United States. The Foodservice segment focuses in the branded and customized food products, including meals, entrees, sauces, and a variety of custom-manufactured culinary products packaged for sale to restaurants and other foodservice establishments in the United States. The Pinnacle Foods segment involves in the commercially branded and private label food and ingredients, in various temperature states, sold in various retail and foodservice channels in the United States and Canada. The company was founded by Alva Kinney and Frank Little in 1919 and is headquartered in Chicago, IL.
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