TD Cowen has adjusted its outlook on ConAgra Brands Inc. (NYSE: CAG), increasing the stock's price target to $30.00 from the previous $28.00, while reaffirming a Hold rating on the shares.
The adjustment comes in the wake of ConAgra's recent stock performance and earnings report.
The firm's decision follows a noticeable 8% decline in ConAgra's stock, which was deemed an excessive market reaction. The first quarter earnings per share (EPS) fell short of expectations, which was attributed to a misjudgment by the sell-side of the anticipated profit rebound in fiscal year 2025 as projected by the company's management.
TD Cowen acknowledged the challenges faced by ConAgra, including persistent weak trends in the category it operates and an increase in trade investments expected in the second quarter. These factors have led to a revision of the EPS estimates downwards.
Despite the reduction in EPS forecasts, the firm raised the price target for ConAgra to $30.00. This adjustment reflects a broader trend of higher valuations across the Consumer Packaged Goods (CPG) sector.
In other recent news, Conagra Brands (NYSE:CAG) has been navigating significant challenges in the first quarter of fiscal 2025, but maintains its fiscal year goals. The company faced a manufacturing disruption at its Hebrew National hot dog plant, resulting in a substantial 47% revenue drop for the brand.
Despite this setback, Conagra reported growth in its domestic retail segment, particularly in frozen and snack categories, with 71% of its portfolio maintaining or gaining market share. The company also made strategic moves, including the acquisition of FATTY Smoked Meat Sticks and the divestiture of Agro Tech Foods, in its commitment to reshaping the portfolio and achieving cost savings.
The company aims to achieve $1 billion in cost savings by fiscal 2025 end, with $350 million expected from productivity initiatives. Looking ahead, Conagra reaffirmed its full-year fiscal 2025 guidance, expecting improved margins in the second half of the year, a sequential volume recovery, and a revised inflation forecast of 3.2% for the total cost of goods sold.
InvestingPro Insights
Recent InvestingPro data provides additional context to TD Cowen's analysis of ConAgra Brands Inc. (NYSE:CAG). The company's market capitalization stands at $14.41 billion, with a P/E ratio of 32.06. This relatively high P/E ratio aligns with TD Cowen's observation of higher valuations across the CPG sector.
InvestingPro Tips highlight ConAgra's strong dividend history, having maintained dividend payments for 49 consecutive years and raised them for 5 consecutive years. This consistent dividend policy may provide some reassurance to investors amid the recent stock price decline and earnings challenges noted in the article.
The company's dividend yield of 4.65% as of the latest data could be attractive to income-focused investors, especially considering the current market conditions. Additionally, InvestingPro Tips indicate that ConAgra's valuation implies a strong free cash flow yield, which could support the company's ability to maintain its dividend policy and invest in future growth.
It's worth noting that InvestingPro offers 7 additional tips for ConAgra, providing a more comprehensive analysis for investors seeking deeper insights into the company's financial health and prospects.
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