Here's Why Conagra (CAG) Is Up More Than 50% In A Year

Conagra Brands, Inc. (NYSE:CAG) is benefiting from brand-modernizing moves, innovation and strategic buyouts. These endeavors have helped the company stay in investors’ good books despite concerns related to business divestitures and input-cost inflation.

We note that shares of this Zacks Rank #3 (Hold) company have surged 59% in a year, outpacing the industry’s growth of 19.8%.



Conagra is focused on reshaping its portfolio by acquiring high-margin businesses and divesting the less profitable ones. The company’s latest development on this front includes the acquisition of Pinnacle Foods. The combination of the companies is appropriate, given the increasing demand for frozen foods and snacks. In fact, the consolidation of these food companies has created a robust portfolio of leading, iconic and on-trend brands.

Notably, Pinnacle Foods’ buyout drove Conagra’s top line in second-quarter fiscal 2020 and is likely to continue boosting its performance in the forthcoming period. Also, Conagra has generated total cost synergies of $112 billion since the buyout. Notably, the company raised its synergy target for fiscal 2020 from around $160 million to roughly $180 million. Through fiscal 2022, it now expects synergies of about $305 million compared with the $285 million expected earlier. Previously, the company took over Angie's Artisan Treats, which is strengthening its snacking business. Also, the Sandwich Bros. buyout has been a valuable inclusion in Conagra’s frozen business.

We believe that the company’s acquisitions go well with its efforts to focus on frozen and snacks categories. Speaking of the frozen business, it has several innovations lined up in this category. Conagra is also on track with innovation in the snacks business, which includes meat snacks with bold flavors and optimized packaging. Such efforts are likely to yield results in the forthcoming periods.

This apart, the company has exited private-label brands and non-key businesses, including the DSD snacks business, Wesson oil business, Gelit, the Trenton production facility, and the Canadian Del Monte business. It also concluded the sale of its peanut butter manufacturing facility (in Streator) after the end of the second quarter of fiscal 2020. This move forms part of Conagra’s efforts to optimize its peanut butter business.

To this end, the company also decided to exit its private-label peanut butter business. Apart from this, Conagra inked a deal to offload its Lender's bagel business, which is part of the Refrigerated & Frozen segment. Also, in 2016, Conagra executed Lamb Weston’s (NYSE:LW) spin-off. These endeavors are expected to continue aiding Conagra’s transformation into a pure-play branded food company.

We believe that these efforts will continue driving the company’s performance and help it sustain momentum next year.

Stocks to Consider

General Mills, Inc. (NYSE:GIS) has a long-term earnings growth rate of 7% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Beyond Meat, Inc. (NASDAQ:BYND) , with a Zacks Rank #2, delivered positive earnings surprise of 20% in the last reported quarter.

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

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

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

Beyond Meat, Inc. (BYND): Free Stock Analysis Report

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