On Friday, Bernstein analysts maintained their Market Perform rating on ConAgra (NYSE:CAG) shares with a steady price target of $28.00. According to InvestingPro analysis, the stock appears slightly undervalued at current levels, with analyst targets ranging from $24.00 to $31.13. The decision followed ConAgra’s recent financial report, which revealed a shortfall in both revenue and earnings compared to analysts’ expectations. The company’s revenue reached $2.841 billion, falling short of consensus estimates by 2.0%. Organic sales growth (OSG) declined by 5.2% year-over-year, which was a more significant drop than the anticipated 4.1%.
ConAgra’s performance marks a deceleration from the previous quarter’s 0.3% OSG, with a noted decrease in price/mix by 2.1% and volume by 3.1%. The adjusted gross margin also underperformed, coming in at 24.8%, which was 138 basis points below the consensus and represented a 389 basis point year-over-year decline. This margin contraction was more pronounced than the 52 basis point decline observed in the last quarter. Despite these challenges, InvestingPro data shows the company maintains a significant 5.23% dividend yield and has maintained dividend payments for an impressive 50 consecutive years.
The company’s adjusted earnings before interest and taxes (EBIT) were $361.9 million, missing consensus estimates by 6.4% and showing a 27.4% decrease from the previous year. Earnings per share (EPS) also disappointed, at $0.51, which was 2 cents below expectations and a 25.6% drop year-over-year. InvestingPro indicates strong fundamentals with a Piotroski Score of 7 and an Altman Z-Score of 4.06, suggesting financial stability despite current headwinds. Get access to 10+ additional exclusive ProTips and comprehensive analysis in the Pro Research Report.
In light of these results, Bernstein adjusted their EBITDA estimates for the upcoming quarters, lowering the forecast from $2,638 million to $2,432 million due to nearer-term supply constraint pressures. However, the firm raised the forward enterprise value to EBITDA (EV/EBITDA) multiple from 8.3x to 8.8x, citing confidence in ConAgra’s defensive position in the market amid current trends. The company’s defensive nature is reflected in its low beta of 0.17, as reported by InvestingPro. Despite the financial misses, Bernstein’s outlook for ConAgra remains steady with a continued Market Perform rating and an unchanged price target of $28.00.
In other recent news, ConAgra Brands, Inc. reported its financial results for the third quarter of fiscal year 2025, revealing a miss on both earnings and revenue compared to analyst forecasts. The company posted earnings per share (EPS) of $0.51, falling short of the expected $0.54, and revenue came in at $2.84 billion, below the anticipated $2.92 billion. Despite these setbacks, ConAgra reaffirmed its full-year 2025 guidance, projecting a 2% decrease in organic sales, an operating margin of 14.4%, and an EPS of approximately $2.35. Analyst firms RBC Capital Markets and Stifel have maintained their ratings on ConAgra stock, with RBC keeping a Sector Perform rating and a $27 price target, while Stifel holds a consistent price target of $26 with a Hold rating.
ConAgra’s financial performance was notably impacted by supply chain disruptions in its Refrigerated & Frozen segment and a challenging consumer market. The company experienced a 5% decline in organic sales during the third quarter, attributed to a 3% drop in volume and a 2% negative impact from price and mix changes. Despite these challenges, ConAgra’s management expressed confidence in meeting year-end goals, citing expected improvements in inventory and margin performance in the fourth quarter. ConAgra also reported a significant free cash flow conversion rate of 125% and paid down $500 million of debt over the past year.
RBC Capital Markets and Stifel have highlighted the complexities ConAgra is navigating, including consumer behavior shifts and operational challenges. Both firms have maintained a cautious outlook, with RBC Capital underscoring the importance of monitoring potential market shifts and consumer patterns that could influence ConAgra’s performance. Meanwhile, Stifel anticipates that an inventory rebuild and improved margin performance in the fourth quarter will compensate for the third-quarter shortfall.
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