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Conagra Earnings Preview: Can CAG Stock Start to Climb?

Conagra Brands CAG stock is slightly down this year while the broader market and many sectors have experienced turbulent volatility. Investors will want to see if the company and the stock can finish the year out strong when it reports earnings tomorrow.

Conagra Basics

Conagra is one of the leading branded food companies in North America which comes along with pricing power during high inflationary periods. Conagra offers premium edible products that include iconic brands like Hunt’s, Slim Jim, and Healthy Choice.

CAG looks posed to be the beneficiary of the consumer shift in spending set to focus on necessities such as food rather than leisure spending or technology products

Last quarter CEO Sean Connolly stated the company faced heightened costs from inflationary pressures but consumer demand remained high. The company expects to see continued strength in sales in fiscal 2023 driven by strong innovation, the impact of pricing actions, and progress in the supply chain to offset continued inflation.

Performance

CAG is only down -2% year to date to outperform the S&P 500’s -21% and its peer group’s -6% decline.

While CAG has mostly treaded water over the last five years, down -2% vs. the benchmark’s +51%, an earnings beat could give the stock some positive momentum.


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CAG’s low beta at 0.57 also suggests the stock may be less volatile going forward. This may be a reason for investors to consider holding the stock as earnings look poised to rise.

Outlook

The Zacks Consensus Estimate for CAG’s fiscal Q1 earnings is $0.52 per share, which would represent a 4% increase from Q1 2022. Sales for Q1 are also expected to be up 6% at $2.83 billion.

CAG is projected to post 2% earnings growth in 2023, with its FY24 earnings set to grow another 4%. Top line growth is also expected, with FY23 sales projected to be up 4% and another 1% in FY24 at $12.17 billion.

Valuation

Currently trading around $33 a share, CAG has a forward P/E of 14X. This is lower than the industry average of 17.6X. CAG also trades below its high of 20.5X over the last five years and near the median during this period.


Image Source: Zacks Investment Research

Bottom Line

CAG currently lands a Zack Rank #3 (Hold) and its Food-Miscellaneous Industry is in the bottom 43% of over 250 Zacks Industries. However, CAG could be poised to be a beneficiary of high inflation as shoppers cut back on leisure spending but food consumption becomes higher as a necessity.  CAG also has an overall “A” VGM grade and has the pricing advantages of its popular brand names.

Investors will hope that Conagra Brands can start to mimic the performance of companies like Campbell Soup CPB, General Mills GIS, and Kellogg's K, which also have pricing advantages from well-known brands.

CAG’s fiscal first quarter earnings will show if the company can increase the profitability of its popular brands during high inflation. Plus, CAG offers patient investors a 3.89% annualized dividend yield at $1.32 a share. CAG’s dividend yield is much higher than most of its industry peers. In comparison, competitor General Mills’ dividend yield is 2.75% at $2.16 a share with investors paying a much higher price for GIS stock. The average Zacks Price Target also suggests 4% upside from CAG’s current levels.


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General Mills, Inc. (GIS): Free Stock Analysis Report
 
Conagra Brands (CAG): Free Stock Analysis Report
 
Campbell Soup Company (CPB): Free Stock Analysis Report
 
Kellogg Company (K): Free Stock Analysis Report
 
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