Jefferies Reiterates Buy Rating on ConAgra (CAG) Due to Attractive Discount
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Jefferies analyst Rob Dickerson reiterated a Buy rating and $41.00 price target on ConAgra (NYSE: CAG) citing advantaged positioning, margin expansion potential, realistic LT targets, upward revision probability, and inexpensive valuation relative to peers. Another factor is the current 20% discount rating, creating an attractive risk/reward.
The analyst stated "A core defensive food name with upward revision potential at a discounted valuation remains our Buy thesis. Conagra this morning topped Q4 expectations, guided to a Q1 ahead of consensus, discussed likely ongoing FAH tailwinds, its value-based portfolio positioning (amid a pressured economic backdrop), the 40% of total Pinnacle synergies remaining over the next two years, impressive trial and repeat rates over the past three months, and strong innovation and ecommerce growth. Remember our recent rating upgrade to Buy was driven by advantaged portfolio/channel/geographic positioning, margin expansion potential, realistic longer-term targets, upward consensus revision probability, and inexpensive valuation relative to peers. What we heard today from mgmt. further increased our conviction regarding the company’s potential to leverage its recent HH penetration and topline lift, while not only reinvesting part of the near-term benefits in incremental capacity and brand building initiatives, but also dropping part of the profit spike to the bottom line. And given consensus still sits ~7% below the midpoint of the CAG’s FY’22 EPS target (and below the guided op margin range) despite increased revenue and profitability potential in a world with increased at-home food consumption, we would expect revisions to move north from here, as the investment community increasingly accepts CAG’s potential to both grow revenues and expand margins (and delever financially). At the current 20% discount relative to the food group (which is trading at 20-yr. low relative to the market), we continue to find the risk/reward attractive and reiterate our Buy rating."
Shares of ConAgra closed at $35.17 yesterday.
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