RBC Capital Reiterated Sector Perform on ConAgra Foods (CAG) Following Announced Restructuring Plans

RBC Capital reiterated a Sector Perform rating and $46.00 price target on ConAgra (NYSE: CAG) following the company's announced restructuring plans. The company expects to realize at least $300M in efficiency savings over the next 3 years.

Analyst David Palmer commented, "ConAgra announced today a new restructuring plan and expects to realize at least $300M (180 bps of sales; 17% of EBIT) in efficiency savings over the next 3 years, continuing the trend of large packaged food companies succumbing to pressures to cut costs, focusing on EPS growth (average mid-tohigh single digit EPS growth) over organic top-line performance that has been in the +0-1% range yoy. $200M of savings is expected from headcount reductions, outsourcing technology and back office functions, and aggressive zero-based budgeting (ZBB). The remaining $100M is expected from improvements to its trade promotion spending process. Geographic rebalancing will cut approximately 1,500 positions (30% of its global office-based workforce, no plant positions affected), excluding impact from the Private Brands sale. ~700 employees will relocate to its new HQ in Chicago, including senior leadership, while maintaining 1,200 administrative, R&D, and supply chain employees in Omaha. The company expects non-recurring cash restructuring charges of approximately $345M over the next 2-3 years in connection."

For an analyst ratings summary and ratings history on ConAgra click here. For more ratings news on ConAgra click here.

Shares of ConAgra closed at $40.51 yesterday.

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