On Monday, Evercore ISI maintained its In Line rating on shares of ConAgra (NYSE:CAG), with a steady price target of $31.00. The firm's stance comes as ConAgra navigates what is considered a "transition year" in Fiscal 2025, aiming to stabilize volume trends amid a challenging environment for U.S. food companies.
ConAgra is focusing on improved productivity to fuel increased promotional spending, especially for its key frozen brands. This strategy appears to be yielding results, with a moderation in consumption sales declines in the Frozen segment, which accounts for 40% of domestic sales. The decline has improved from -2.5% last quarter to around -1%, and the company's frozen entree dollar market share is on the rise.
Despite these positive signs, Evercore ISI awaits clearer evidence of sustained and healthy growth in both revenue and earnings before adjusting their outlook. This cautious approach is mirrored in the consensus estimates, which forecast organic revenue and EPS growth of 1% and 3% respectively for Fiscal Year 2026.
The $31 price target set by Evercore ISI is based on 12 times the firm's estimated Fiscal Year 2025 earnings per share (EPS) of $2.62, which represents a slight year-over-year decrease. This valuation is slightly below the midpoint price-to-earnings (P/E) ratio of 13 times, which falls within a five-year next twelve months (NTM) range of 10 to 16 times, and is also under the average P/E multiple of ConAgra's center store peers.
In other recent news, ConAgra Brands has been making strategic moves to bolster its growth. The company acquired Sweetwood Smoke & Co., adding FATTY Smoked Meat Sticks to its product portfolio, aligning with its focus on health-conscious, convenient options. Analysts from Jefferies and Citi have adjusted their price targets for ConAgra, with Jefferies raising it to $30 from $27 and Citi to $33 from $30, both maintaining neutral ratings.
Goldman Sachs initiated coverage on ConAgra, assigning a Buy rating, citing the company's robust snack portfolio and recent acquisition as growth drivers. ConAgra's shareholders approved an amendment for officer exculpation and elected eleven nominees to serve as directors during their Annual Meeting, though the named executive officer compensation was not approved.
The company anticipates fiscal year 2025 to be transitional, projecting a range of -1.5% to flat growth for organic net sales and an adjusted EPS of $2.60 to $2.65.
InvestingPro Insights
To complement Evercore ISI's analysis, recent data from InvestingPro offers additional perspective on ConAgra's financial position. The company's market cap stands at $15.55 billion, with a P/E ratio (adjusted) of 13.4 for the last twelve months as of Q4 2024, aligning closely with Evercore's valuation metrics. This P/E ratio is significantly lower than the current P/E of 44.94, suggesting potential undervaluation based on recent earnings.
InvestingPro Tips highlight ConAgra's strong dividend profile, noting that the company has maintained dividend payments for 49 consecutive years and has raised its dividend for 4 consecutive years. This commitment to shareholder returns is further emphasized by the current dividend yield of 4.31%, which may be attractive to income-focused investors.
While Evercore ISI maintains a cautious stance, InvestingPro Tips indicate that net income is expected to grow this year, and analysts predict the company will be profitable. This aligns with the firm's view of a "transition year" potentially leading to improved performance.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for ConAgra, providing a deeper dive into the company's financial health and market position.
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