Conagra Brands' Stock Rises Despite Lagging Earnings Growth

Conagra Brands' stock has risen 12% in three months despite lagging ROE and earnings growth. Institutional investors have increased their stakes, with 83.75% of the company's stock now owned by institutions.

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Aqsa Younas Rana
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Conagra Brands' Stock Rises Despite Lagging Earnings Growth

Conagra Brands' Stock Rises Despite Lagging Earnings Growth

Conagra Brands, Inc. (NYSE: CAG) has seen its stock rise 12% over the last three months, despite the company's 10% Return on Equity (ROE) and 2.9% earnings growth over the past five years lagging behind the industry average. This has raised concerns among investors and analysts about Conagra's future earnings growth potential.

Why this matters: The performance of Conagra Brands, a major consumer packaged goods food company, has implications for the broader food industry and the economy as a whole. A decline in Conagra's earnings growth could have a ripple effect on its suppliers, partners, and ultimately, consumers.

Institutional investors have been increasing their stakes in Conagra Brands. Natixis Advisors L.P. grew its position by 3.1% in the fourth quarter, now owning 159,495 shares worth $4,570,000. Other firms like HM Payson & Co., Parkside Financial Bank & Trust, Blue Trust Inc., Venturi Wealth Management LLC, and Stonegate Investment Group LLC have also added to their Conagra holdings. As of now, 83.75% of the company's stock is owned by institutional investors.

For the most recent quarter, Conagra Brands reported earnings of $0.69 per share, beating consensus estimates of $0.64 by $0.05. The company posted revenue of $3.03 billion, a 1.7% decrease compared to the same quarter last year. Conagra's net margin came in at 7.86%, with a return on equity of 14.25%.

Conagra Brands declared a quarterly dividend of $0.35 per share, payable on May 30th to shareholders of record as of April 29th. This translates to an annualized dividend of $1.40 and a yield of 4.50%. The company has been a consistent dividend payer, with a payout ratio of 70.35%, which is considered healthy and sustainable.

Several analysts have weighed in on Conagra Brands' stock recently. Stifel Nicolaus, Wells Fargo & Company, Citigroup, and Barclays have all increased their price targets on the stock while maintaining "hold" or "neutral" ratings. The average rating on the stock is currently a "Hold," with a consensus price target of $33.14.

Conagra Brands, Inc. operates as a consumer packaged goods food company, primarily in the United States. The company's portfolio includes brands such as Birds Eye, Marie Callender's, Duncan Hines, Healthy Choice, Slim Jim, Reddi-wip, Angie's BOOMCHICKAPOP, Duke's, Earth Balance, Gardein, and Frontera. Conagra's products span multiple segments, including Grocery & Snacks, Refrigerated & Frozen, International, and Foodservice.

While Conagra Brands' stock has performed well in recent months, the company's lagging ROE and earnings growth compared to industry peers remain a concern for investors. Conagra's future earnings growth will largely depend on its ability to reinvest profits and improve its return on equity. Despite these challenges, the company's strong institutional ownership and consistent dividend payouts provide some reassurance to shareholders.

Key Takeaways

  • Conagra Brands' stock rose 12% in 3 months despite lagging ROE and earnings growth.
  • Institutional investors own 83.75% of Conagra's stock, with recent increases in stakes.
  • Conagra reported $0.69 EPS, beating estimates, with a 7.86% net margin and 14.25% ROE.
  • The company declared a $0.35 quarterly dividend, yielding 4.50% with a 70.35% payout ratio.
  • Analysts have mixed ratings, with a "Hold" average rating and $33.14 consensus price target.