Conagra (CAG) Focuses On Reshaping Portfolio, Divests Gelit

Moving ahead with its portfolio refinement efforts, Conagra Brands, Inc. (NYSE:CAG) concluded the previously announced sale of its Italy-based frozen pasta business — Gelit. The company divested Gelit to an Italian investment company, with terms of the deal under covers.

Portfolio Refinement on Track

In a similar move, Conagra sold Wesson oil brand to Richardson International this February. The divestiture involved the sale of all assets associated with the Wesson brand along with the Memphis facility.

These actions reflect the company’s focus on boosting competency by reshaping its portfolio. In sync with this, the company is trying to acquire high-margin generating businesses and divest the less profitable ones.

Prior to this, Conagra exited private label brands and non-key businesses, including Spicetec and JM Swank, and executed Lamb Weston’s (NYSE:LW) spin-off in 2016. Moreover, the company concluded the sale of the Canadian Del Monte processed fruit and vegetable business to Bonduelle Group during the first quarter of fiscal 2019.

At the same time, Conagra is also focused on scooping up businesses, which are expected to add to its value. Its latest development on this front includes the acquisition of Pinnacle Foods, which was closed in October 2018. Notably, the combined giant is likely to be the second largest player in the frozen foods space. The consolidation of these food companies is likely to create a robust portfolio of leading, iconic and on-trend brands, which will help the combined entity speed up innovation and exploit the long-term benefits in the frozen foods space.

In previous instances, the company took over Angie's Artisan Treats, LLC (in October 2017), which is strengthening its snacking business. Sandwich Bros. buyout (completed in February 2018) is also aiding Conagra’s frozen business. In fact, contributions from Sandwich Bros. and Pinnacle Foods aided the top line during the third quarter of fiscal 2019.

Will Momentum Stay?

Driven by its portfolio reshaping efforts and other growth strategies, Conagra’s shares have rallied 22.4% in the past three months, outpacing the industry’s growth of 5.5%. However, the company is struggling with soft sales at its Foodservice segment owing to weak volumes. Also, like many other food companies, including General Mills (NYSE:GIS) and Campbell Soup (NYSE:CPB) , Conagra is exposed to headwinds like input cost inflation.

Nonetheless, we believe that robust growth measures will help offset these hurdles and enable this Zacks Rank #3 (Hold) stock to sustain momentum.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Will you retire a millionaire?

One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”

Click to get it free >>

Conagra Brands Inc. (CAG): Free Stock Analysis Report

General Mills, Inc. (GIS): Free Stock Analysis Report

Campbell Soup Company (CPB): Free Stock Analysis Report

Lamb Weston Holdings Inc. (LW): Free Stock Analysis Report

Original post

Zacks Investment Research