On Friday, ConAgra Brands, Inc. (NYSE:CAG) saw its price target increased by Citi from $30.00 to $32.00, while the firm kept a Neutral rating on the stock. This adjustment comes in the wake of the company's shares climbing by 5% on Thursday after it reported higher-than-expected sales and earnings per share. The performance was largely attributed to a stronger price and product mix within its Grocery and Snacks segment.
ConAgra's recent financial guidance suggests there might be potential for further upside in the fourth quarter of 2024. This optimism is based on the possibility of volume growth as the company moves past the effects of SNAP benefit reductions and recovers from the Americold cyberattack.
Citi notes that ConAgra could benefit more than its peers from a market re-rating if investor sentiment turns favorable towards food stocks. This is due to ConAgra's lower valuation multiples and higher debt levels compared to other companies in the sector.
Despite the positive outlook for the fourth quarter, Citi anticipates only modest earnings per share growth for ConAgra over the next few years. Additionally, the firm expects ConAgra's organic sales growth to be at the lower end of the spectrum within its industry group. These factors contribute to Citi's stance that a discount to the group average is justified for ConAgra, reinforcing the decision to maintain a Neutral rating despite the price target increase.
The move by Citi reflects a cautious optimism about ConAgra's near-term prospects, balanced against longer-term growth challenges. The updated price target of $32.00 represents a slight boost in confidence in the company's financial performance, yet the neutral stance indicates a wait-and-see approach to ConAgra's future growth trajectory.
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