We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. By pressing "Accept All" or closing out of this banner, you accept our Privacy Policy and Terms of Service, revised from time to time, and you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties. You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's How Conagra is Navigating Market Challenges With Strategic Moves
Read MoreHide Full Article
Conagra Brands, Inc. (CAG - Free Report) leverages strategic initiatives to boost growth and recover margins despite a challenging market environment. The company’s strong performance in snacks and frozen foods, coupled with portfolio restructuring to meet shifting consumer demands, highlights its growth strategy. However, underlying inflation and a struggling Foodservice unit raise concerns about its ability to maintain momentum.
Strategic Moves Power CAG’s Growth Story
Conagra is actively reshaping its portfolio to drive growth and improve margins by investing in innovation, brand modernization and strategic acquisitions or divestitures. In first-quarter fiscal 2025, the company acquired FATTY Smoked Meat Sticks, strengthening its position in the high-growth, high-margin meat stick category. In addition, the company divested its majority stake in Agro Tech Foods Limited in India. Over the past decade, Conagra has made significant progress in transforming its portfolio, and management will continue exploring opportunities for accelerated growth and improved profitability.
Conagra's productivity initiatives are essential to its strategic approach, as the savings fuel investments in brand-building and portfolio restructuring. In the fiscal first quarter, management reported continued improvements in free cash flow, reducing the cash conversion cycle by seven days compared to the previous period.
CAG’s Growth in Snacks and Frozen Categories
On its last earnings call, management highlighted that the company’s snack offerings significantly outperform the overall snacking category, thanks to its strong portfolio. Its brands are positioned in trending, permissible snacking segments such as meat snacks, popcorn and seeds, aligning with consumer preferences for low-carb, protein- and fiber-rich options. Brands like Slim Jim, Duke's, David and Angie's BOOMCHICKAPOP are leading this shift. The permissible snacking market is expanding rapidly, and Conagra’s well-established brands are reaping the benefits.
Conagra has been seeing market share gains in the key frozen and snacks categories. The strength of the frozen category reflects the forte of the company’s brands and the effective execution of the Conagra Way playbook. Conagra has made several investments in the innovation of key brands of the frozen business, which are yielding a favorable response. Conagra has achieved significant volume improvement in its domestic retail business, particularly in the strategic frozen and snack categories.
Image Source: Zacks Investment Research
Roadblocks for Conagra
Conagra has been encountering cost inflation for a while, which is affecting its profitability. In the fiscal first quarter, the company witnessed year-over-year inflation in the cost of goods sold (COGS) of 3.3% due to increases in protein, sweetener and warehousing expenses. The adjusted gross margin contracted 163 basis points to 26% in the quarter, thanks to lower organic net sales, cost of goods sold inflation, adverse operating leverage and the impacts of the manufacturing disruptions. Management expects a fiscal 2025 COGS inflation rate of nearly 3.2%, pronounced in the protein and sweetener categories.
Conagra’s Foodservice unit is under pressure due to sluggish consumption trends, reflecting broader industry challenges. The segment’s reported sales decline of 7.8% to $266.7 million in the fiscal first quarter. Organic sales tumbled 7.9%, whereas volumes declined 11.1% on account of the ongoing effects of the exit of lower margin business, along with the current sluggishness in restaurant traffic. The persistence of this trend remains a concern as the segment continues to navigate a tough operating environment with ongoing pressures on consumer demand and dining-out behavior.
Final Words on CAG Stock
Conagra’s strategic focus on high-growth categories like snacks and frozen foods is promising, but persistent inflation presents significant obstacles. With the company targeting $1 billion in cost savings by the end of fiscal 2025, its productivity initiatives could help mitigate some pressures. However, the effectiveness of these measures in driving sustained profitability remains to be seen. At present, CAG carries a Zacks Rank #3 (Hold).
Shares of the company have dropped 13.6% in the past three months compared with the industry’s decline of 4.7%.
Top Three Consumer Staple Picks
Ingredion Incorporated (INGR - Free Report) manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank #1 (Strong Buy). INGR has a trailing four-quarter earnings surprise of 9.5%, on average.
The Zacks Consensus Estimate for Ingredion’s current financial year’s earnings indicates growth of 12.5% from the year-ago reported number.
Freshpet Inc. (FRPT - Free Report) manufactures, distributes and markets natural fresh meals and treats for dogs and cats. It currently carries a Zacks Rank #2 (Buy). FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings implies growth of 27.3% and 224.3%, respectively, from the prior-year reported levels.
McCormick & Company (MKC - Free Report) , which manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products, currently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 13.8%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings indicates growth of 0.6% and 8.2%, respectively, from the prior-year reported levels.
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report predicting the 7 stocks that will soar highest in the coming month.
Image: Bigstock
Here's How Conagra is Navigating Market Challenges With Strategic Moves
Conagra Brands, Inc. (CAG - Free Report) leverages strategic initiatives to boost growth and recover margins despite a challenging market environment. The company’s strong performance in snacks and frozen foods, coupled with portfolio restructuring to meet shifting consumer demands, highlights its growth strategy. However, underlying inflation and a struggling Foodservice unit raise concerns about its ability to maintain momentum.
Strategic Moves Power CAG’s Growth Story
Conagra is actively reshaping its portfolio to drive growth and improve margins by investing in innovation, brand modernization and strategic acquisitions or divestitures. In first-quarter fiscal 2025, the company acquired FATTY Smoked Meat Sticks, strengthening its position in the high-growth, high-margin meat stick category. In addition, the company divested its majority stake in Agro Tech Foods Limited in India. Over the past decade, Conagra has made significant progress in transforming its portfolio, and management will continue exploring opportunities for accelerated growth and improved profitability.
Conagra's productivity initiatives are essential to its strategic approach, as the savings fuel investments in brand-building and portfolio restructuring. In the fiscal first quarter, management reported continued improvements in free cash flow, reducing the cash conversion cycle by seven days compared to the previous period.
CAG’s Growth in Snacks and Frozen Categories
On its last earnings call, management highlighted that the company’s snack offerings significantly outperform the overall snacking category, thanks to its strong portfolio. Its brands are positioned in trending, permissible snacking segments such as meat snacks, popcorn and seeds, aligning with consumer preferences for low-carb, protein- and fiber-rich options. Brands like Slim Jim, Duke's, David and Angie's BOOMCHICKAPOP are leading this shift. The permissible snacking market is expanding rapidly, and Conagra’s well-established brands are reaping the benefits.
Conagra has been seeing market share gains in the key frozen and snacks categories. The strength of the frozen category reflects the forte of the company’s brands and the effective execution of the Conagra Way playbook. Conagra has made several investments in the innovation of key brands of the frozen business, which are yielding a favorable response. Conagra has achieved significant volume improvement in its domestic retail business, particularly in the strategic frozen and snack categories.
Image Source: Zacks Investment Research
Roadblocks for Conagra
Conagra has been encountering cost inflation for a while, which is affecting its profitability. In the fiscal first quarter, the company witnessed year-over-year inflation in the cost of goods sold (COGS) of 3.3% due to increases in protein, sweetener and warehousing expenses. The adjusted gross margin contracted 163 basis points to 26% in the quarter, thanks to lower organic net sales, cost of goods sold inflation, adverse operating leverage and the impacts of the manufacturing disruptions. Management expects a fiscal 2025 COGS inflation rate of nearly 3.2%, pronounced in the protein and sweetener categories.
Conagra’s Foodservice unit is under pressure due to sluggish consumption trends, reflecting broader industry challenges. The segment’s reported sales decline of 7.8% to $266.7 million in the fiscal first quarter. Organic sales tumbled 7.9%, whereas volumes declined 11.1% on account of the ongoing effects of the exit of lower margin business, along with the current sluggishness in restaurant traffic. The persistence of this trend remains a concern as the segment continues to navigate a tough operating environment with ongoing pressures on consumer demand and dining-out behavior.
Final Words on CAG Stock
Conagra’s strategic focus on high-growth categories like snacks and frozen foods is promising, but persistent inflation presents significant obstacles. With the company targeting $1 billion in cost savings by the end of fiscal 2025, its productivity initiatives could help mitigate some pressures. However, the effectiveness of these measures in driving sustained profitability remains to be seen. At present, CAG carries a Zacks Rank #3 (Hold).
Shares of the company have dropped 13.6% in the past three months compared with the industry’s decline of 4.7%.
Top Three Consumer Staple Picks
Ingredion Incorporated (INGR - Free Report) manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank #1 (Strong Buy). INGR has a trailing four-quarter earnings surprise of 9.5%, on average.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ingredion’s current financial year’s earnings indicates growth of 12.5% from the year-ago reported number.
Freshpet Inc. (FRPT - Free Report) manufactures, distributes and markets natural fresh meals and treats for dogs and cats. It currently carries a Zacks Rank #2 (Buy). FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings implies growth of 27.3% and 224.3%, respectively, from the prior-year reported levels.
McCormick & Company (MKC - Free Report) , which manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products, currently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 13.8%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings indicates growth of 0.6% and 8.2%, respectively, from the prior-year reported levels.