Shares of Conagra CAG surged for a month following its strong Q4 FY20 performance at the end of June. The packaged-food giant has fallen since then and it has largely tracked the S&P 500 in 2020. So let’s see if investors might want to consider Conagra, with CAG’s first quarter fiscal 2021 financial results due out before the opening bell on Thursday, October 1.
Conagra’s diverse portfolio of packaged foods includes Orville Redenbacher's, Marie Callender's, Hunt's, Reddi-Wip, and much more. The company benefited from early coronavirus-focused stockpiling, alongside peers like General Mills GIS, Kraft Heinz KHC, and Mondelez MDLZ.
CAG’s revenue surged 26% during the three-month period that ended on May 31, with organic sales up 22%. Meanwhile, its adjusted Q4 earnings more than doubled to $0.75 a share to top our estimate by over 10%. “Our business clearly benefited from increased at-home eating in the fourth quarter, as the elevated retail demand outweighed the reduced foodservice demand," CEO Sean Connolly said in prepared remarks.
"In retail, many consumers tried our modernized products for the first time and then returned for more."
The Chicago-based firm also provided upbeat first quarter guidance. Zacks estimates call for CAG’s adjusted quarterly earnings to climb 33% to reach $0.57 per share, with its revenue projected to climb another 9.2% to hit $2.61 billion.
The nearby chart helps showcase that Conagra and its industry have been hurt over the last five years by a changing retail environment and evolving eating habits. To help grow its businesses and adapt, CAG has made some acquisitions, which includes its 2018 purchase of Pinnacle Foods and its brands such as Duncan Hines, Earth Balance, Vlasic, and more.
CAG shares are still down around 12% in the past five years, which falls well below the broader consumer staples market’s 8% climb and the Food Market’s 2% drop. But Conagra shares have soared 66% since the start of 2019 to blow away its industry’s 10% and its peer group—which includes Kellogg K, Campbell CPB, and others—30% jump.
The stock closed regular trading Monday at $35.46 per share, down about 8% from its late August highs. Despite its recent dip, the stock is up 15% over the past 12 months. This helps make it 2.40% dividend yield more impressive, as it tops the S&P 500’s 1.70% average and the 30-year U.S. Treasury’s 1.40%.
Conagra lands a Zacks Rank #3 (Hold) at the moment. Investors should note that its growth is currently expected to slow significantly in the second half of FY21, with pandemic shopping projected to slow.
Some might want to consider CAG for its dividend given the current interest rate environment. But it might be best to wait to see how its guidance comes in before taking a chance.
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Conagra Brands Inc. (CAG) : Free Stock Analysis Report
Campbell Soup Company (CPB) : Free Stock Analysis Report
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General Mills, Inc. (GIS) : Free Stock Analysis Report
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