Conagra Brands (CAG) Looks Bullish On Robust Growth Drivers

Conagra Brands, Inc. (NYSE:CAG) was upgraded by a notch to a Zacks Rank #2 (Buy) on Nov 22. Per the Zacks model, companies with a Zacks Rank #2 are likely to perform better than the broader market in the next two to three months.

Over the last three months, Conagra’s shares have gained of 3.9%, as against the industry's decline of 2%.

Notably, the attractiveness of this stock as a current investment choice is further accentuated by its favorable VGM Score of B.

Factors Behind the Upside

Stronger demand for on-trend brands such as Hunts, Peter Pan and Healthy Choice is expected to boost Conagra’s aggregate revenues in the quarters ahead. Moreover, ongoing efforts made to launch new products and grab a large share of market demand are anticipated to strengthen top-line results, going forward. For instance, the Power Bowls rolled out this May and the new varieties of Pam Spray Pumps launched this September would assist in boosting Conagra’s near-term sales.

The company anticipates to improve its profitability on the back of stronger revenues, ongoing volume strategy, sturdier supply-chain productivity and price mix enhancements. Meanwhile, Conagra believes that these factors would continue to drive its margin growth by nearly 32% by the end of fiscal 2020. Moreover, wider margins, increased share repurchase and lowered interest expense (as a result of reduced debt burden) are expected to strengthen earnings in the quarters ahead. Conagra’s earnings per share are projected to improve by 7% in the next three to five years.

Additionally, Conagra is consistently restructuring its business portfolio through disciplined mergers and acquisitions, and divestments of unwanted assets. To this end, the divestiture of J.W. Swank and Spicetec Flavors & Seasonings businesses (completed in July 2016) is expected to continue boosting the company’s profitability over the long run. Notably, Conagra believes Wesson brand’s spin-off will also complement its portfolio restructuring strategy.

Furthermore, strategic buyouts of fast-growing meat snack brands like Duke’s and BIGS (closed in April 2017) as well as Angie's Artisan Treats, LLC acquisition (closed in October 2017) is likely to underpin Conagra’s competency in the near term.

Conagra is committed toward its shareholders and augments their returns through lucrative dividend and share buyback programs. Why not u add something abt dividend or share buybacks here

Over the last 60 days, Zacks Consensus Estimate for the stock has moved north for both fiscal 2018 and 2019, reflecting positive sentiments.

Other Stocks to Consider

Some other top-ranked stocks within the same space are listed below:

Associated British Foods (LON:ABF) PLC (OTC:ASBFY) holds a Zacks Rank #2. The company’s earnings are projected to grow by 12% in the next three to five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Flowers Foods, Inc. (NYSE:FLO) carries a Zacks Rank #2. The company’s earnings are projected to grow by 6.1% in the next three to five years.

Lamb Weston Holdings Inc. (NYSE:LW) carries a Zacks Rank #2. The company’s earnings are projected to grow by 5.7% in the next three to five years.

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