Core Insights - Conagra Brands, Inc. has agreed to sell its Van de Kamp's® and Mrs. Paul's® frozen seafood brands to High Liner Foods for $55 million in cash, which includes all associated intellectual property and inventory [1][2] - The divested brands contributed approximately $75 million to Conagra's fiscal year 2024 net sales, and the sale is expected to have a ($0.01) impact on fiscal year 2026 adjusted earnings per share [1][2] - The transaction is anticipated to close by the end of July 2025, with proceeds aimed at reducing the company's debt [1] Company Strategy - The divestiture is part of Conagra's strategy to reshape its portfolio and focus on core frozen offerings, as stated by the CEO Sean Connolly [2] - Van de Kamp's and Mrs. Paul's are recognized as leading brands in the U.S. frozen breaded and battered seafood category, providing various products for snacks and meals [2] Company Overview - Conagra Brands, Inc. is a leading branded food company in North America, with a history of over 100 years and a focus on innovation and collaboration [3] - The company's portfolio includes well-known brands such as Birds Eye®, Duncan Hines®, and Healthy Choice®, and it generated over $12 billion in net sales for fiscal 2024 [3]

Core Insights - Conagra Brands, Inc. (CAG) is currently trading at a forward 12-month price-to-earnings ratio of 9.68X, significantly below the industry average of 16.03X and the S&P 500's average of 21.88X, indicating potential undervaluation and an attractive investment opportunity [1] - CAG's Value Score is currently rated A, further supporting its attractiveness to investors [1] Financial Performance - CAG's shares have declined by 9.4% over the past three months, while the industry and S&P 500 have seen declines of 3% and 0.9%, respectively [4] - The stock is currently priced at $23.01, close to its 52-week low of $22.38, which may appeal to value-focused investors [4] Growth Strategy - Conagra is actively reshaping its portfolio to align with evolving consumer preferences, focusing on innovation, brand modernization, and strategic acquisitions and divestitures [5] - The company has exited low-growth businesses and is strengthening its presence in key categories [5] Market Position - CAG's diverse portfolio across frozen foods, snacks, and staples allows it to capitalize on various consumer trends while reducing risks from category fluctuations [6] - In the third quarter of fiscal 2025, CAG reported strong consumer demand across its brands, despite facing temporary supply constraints [6] Segment Performance - The snacking segment is a key growth driver, with volumes increasing by 4% in the fiscal third quarter, supported by high-demand subcategories like seeds, meat snacks, and popcorn [7] - However, the Foodservice unit has faced challenges, with sales dropping 6.1% year over year to $256 million, reflecting broader industry pressures [8] International Exposure - CAG's International segment experienced a 17.6% decline in net sales year over year to $224 million, primarily due to adverse currency fluctuations [9] Cost Pressures - Sustained cost inflation, approximately 4% in the fiscal third quarter, has negatively impacted profitability, leading to a 19.1% decline in adjusted gross profit to $704 million [10] - The adjusted gross margin contracted by 389 basis points to 24.8%, with expectations of some margin improvement in the fiscal fourth quarter, though not sufficient to fully offset cost pressures [10] Investment Outlook - CAG's focused brand investments and strong presence in high-growth categories position it for long-term growth, despite near-term challenges such as foodservice segment weakness and cost inflation [13]

Industry Overview - The Zacks Food-Miscellaneous industry is facing challenges due to inflation impacting consumer spending and a shift towards private-label food alternatives [1][4] - Rising input costs and operational expenses are pressuring profit margins across the sector [1][5] - The industry includes companies that manufacture a variety of food products, including cereals, sauces, spices, and frozen items, sold through various distribution channels [3] Major Trends - Consumers are increasingly favoring cost-effective food options, leading to a decline in foodservice performance and softened sales volumes for major brands [4] - Companies are responding by implementing value-driven marketing strategies and expanding affordable food offerings [4] - Established brands are leveraging customer loyalty and innovation to maintain market position, with a focus on healthier product options [6] Cost Pressures - Rising prices of key ingredients and increased labor, packaging, and transportation costs are straining profit margins [5] - Companies are investing in performance improvements and efficiency upgrades, which, while essential for long-term success, contribute to near-term financial challenges [5] - Global trade tensions and tariffs are further increasing input costs, particularly for imported raw materials [5] Industry Performance - The Zacks Food-Miscellaneous industry has underperformed the S&P 500 and the broader Zacks Consumer Staples sector over the past year, declining 14.2% compared to the S&P 500's growth of 11.2% [10] - The industry's current Zacks Industry Rank is 155, placing it in the bottom 37% of over 250 Zacks industries, indicating bleak near-term prospects [7][8] Current Valuation - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 15.97X, lower than the S&P 500's 21.37X and the sector's 17.39X [13] - Over the past five years, the industry has traded between 14.47X and 20.75X, with a median of 17.63X [13] Company Highlights - Mondelez International, Inc. (MDLZ) is focusing on its core snacking categories and has seen a 3.8% increase in the consensus EPS estimate to $3.01 [16][17] - The Kraft Heinz Company (KHC) aims to unlock $2.5 billion in gross efficiencies by 2027 and has seen a slight decline in its EPS estimate to $2.57 [20][21] - McCormick & Company, Incorporated (MKC) is enhancing operating margins through its Comprehensive Continuous Improvement program, with an unchanged EPS estimate of $3.05 [23][25] - Conagra Brands, Inc. (CAG) is focusing on premium products and has maintained its EPS estimate at $2.34, despite a 25% decline in shares over the past year [26][29]

Conagra Brands (CAG) Conference Summary Company Overview - Conagra Brands is one of the largest packaged food companies in the US, with a diverse portfolio including frozen snacks and shelf-stable products, serving retail, food service, and international markets. Notable brands include Marie Callender's, Birds Eye, Healthy Choice, and Slim Jim [2][4]. Key Points and Arguments Portfolio Transformation - Over the past ten years, Conagra has transformed from a diversified global holding company to a branded pure play focused on North America. This involved modernizing existing brands, acquiring new businesses, and divesting underperforming assets [4][5]. - The current portfolio has a significant focus on organic net sales from retail, particularly in frozen and permissible snacking, which now constitutes about two-thirds of retail sales [5][6]. Consumer Trends and Market Environment - The company has observed a shift towards conservatism among consumers due to prolonged inflation and economic uncertainty. This trend affects all income groups, particularly lower-income consumers [9][10]. - The current environment is characterized by cautious spending, with consumers prioritizing value and quality in their purchases [10][11]. Promotional Strategy - Conagra has reduced promotional activities compared to pre-COVID levels, focusing on high-quality merchandising rather than deep discounting. This strategy aims to drive volume growth through quality products [12][14]. - The competitive landscape remains rational, with a collective industry focus on improving volume trends after experiencing declines [16][18]. Input Costs and Inflation - The company faces significant input cost pressures, particularly from tariffs on tinplate and aluminum, with a 25% tariff impacting costs. Mitigation strategies include negotiating with suppliers and exploring alternative sourcing [20][22]. - Inflation is projected at 4% for the fiscal year, up from an initial estimate of 3%. The company is actively managing costs and exploring pricing strategies to offset inflationary pressures [26][27][54]. Frozen and Snacking Segments - The frozen food segment is experiencing a return to volume growth, driven by consumer demand for convenience and quality. The company aims to educate consumers on the benefits of frozen foods, which are perceived as high-quality and cost-effective [33][35][38]. - In the snacking category, Conagra has focused on permissible snacking options, such as meat snacks and popcorn, which have shown strong growth despite broader industry softness. The company has expanded its portfolio to include various meat snack brands [39][41][46]. Future Outlook and Guidance - The company is optimistic about maintaining volume growth and improving margins, despite ongoing supply chain challenges and inflationary pressures. The focus remains on optimizing trade management and promotional investments [49][52][54]. - Conagra plans to provide further guidance for fiscal year 2026 in the upcoming earnings call, with expectations of navigating through current uncertainties [60][62]. Capital Allocation and Debt Management - Conagra emphasizes a balanced approach to capital allocation, prioritizing debt paydown while also considering investments in business modernization and strategic acquisitions. The recent divestiture of Chef Boyardee aligns with this strategy [67][72]. - The company has successfully reduced leverage and aims to continue generating free cash flow to support debt reduction and strategic growth initiatives [64][66]. Additional Important Insights - The company has experienced supply chain disruptions, particularly in its frozen vegetable and chicken businesses, but is on track to recover by the end of the first quarter of fiscal 2026 [75][78]. - Innovations, such as the Banquet Mega Chicken Filet, have driven demand and contributed to supply challenges, highlighting the importance of product development in meeting consumer needs [79][80].

Core Viewpoint - Conagra Brands, Inc. has published its 2024 Citizenship Report, emphasizing its commitment to positive impacts on employees, communities, and the environment through four focus areas: Good Food, Responsible Sourcing, Better Planet, and Stronger Communities [1][2]. Good Food - Conagra is focused on producing safe, delicious, and nutritious foods that cater to modern consumer needs, ensuring access to information for informed dietary choices [2][6]. Responsible Sourcing - The company emphasizes careful sourcing of ingredients and packaging, considering environmental and social impacts, and promoting circularity through regenerative agriculture and thoughtful packaging design [3][6]. Better Planet - Conagra is committed to responsible environmental practices, aiming to reduce energy use, manage water resources efficiently, and minimize waste [4][6]. Stronger Communities - The company aims to foster an inclusive culture, supporting employees' growth and addressing food insecurity through volunteerism, product donations, and financial contributions [5][6]. Key Achievements - 100% of Conagra's production facilities have achieved Global Food Safety Initiative (GFSI) certification [6]. - Over 71% of frozen meals and vegetable products, and 85% of plant-based offerings meet the Health Star Rating for "healthier" foods [6]. - Significant environmental initiatives include avoiding over 288,000 lbs. of nitrogen application through crop rotation and reducing water use by nearly 15% with drip irrigation [6]. - 90% of solid waste was diverted to beneficial uses, and over 24.5 million pounds of food were donated to Feeding America, equating to more than 20.5 million meals [6][7]. Financial Overview - Conagra Brands generated net sales exceeding $12 billion in fiscal 2024 [8].

Group 1 - The article gives a sell rating for Conagra Brands (NYSE: CAG) due to concerns about potential further de-rating if the company misses estimates [1] - Current valuation is approximately 10x forward PE, indicating that the stock may be overvalued [1] - Expected headwinds for margins are highlighted, suggesting that profitability may be under pressure [1] Group 2 - The author emphasizes a diverse investing background, utilizing fundamental, technical, and momentum investing strategies [1] - The purpose of writing on Seeking Alpha is to track investment ideas and connect with like-minded investors [1]

Core Viewpoint - Conagra Brands Inc. reported disappointing third-quarter earnings for 2024, missing revenue and earnings per share estimates, yet managed a slight stock gain amidst broader market declines [1][2][3] Financial Performance - Revenue for the quarter was $2.84 billion, slightly below the expected $2.92 billion, with earnings per share (EPS) at 51 cents, one cent below estimates [2] - Net sales declined by 6.3% year-over-year, with a projected full-year net sales decline of approximately 2% and adjusted EPS expected to drop from $2.67 to $2.35 [3][4] - Operating margin fell to 8.4%, a decrease of 712 basis points [4] Market Trends - Consumers are increasingly turning to private-label brands due to inflation, impacting Conagra's sales [3][10] - The company continues to hold a majority volume in the $6.4 billion single-serve meals category, with a 0.6% year-over-year volume increase in the last quarter [7] Product Development - Conagra plans to label select Health Choice frozen food lines as "GLP-1 friendly" starting January 2025, indicating a focus on health-conscious products [5][6] - The frozen foods category is outperforming the broader edible market, with three consecutive quarters of retail volume growth [7] Stock and Dividend Information - Conagra's stock is currently yielding 5.24% with an annual dividend of $1.40 and a payout ratio of 137.25% [11] - The stock is viewed as a potential safe haven during market uncertainty, supported by a forward P/E ratio of around 11x and a consensus price target of $28.20 [12]

Group 1: Investment Opportunities - Lamb Weston (NYSE: LW) and Conagra Brands (NYSE: CAG) are trading at value levels with historically high yields for investors in 2025 [1] - Both companies are at the low ends of their historical ranges and below broad market averages, presenting potential investment opportunities [1][10] - Lamb Weston is expected to outperform Conagra in early 2025, showing growth while Conagra faces challenges [2][3] Group 2: Financial Performance and Forecasts - Lamb Weston has a 12-month stock price forecast of $73.55, indicating a 23.61% upside from the current price of $59.50 [2] - Conagra's 12-month stock price forecast is $28.20, with a 5.57% upside from the current price of $26.71 [7] - Both companies are expected to revert to revenue growth in 2026 and maintain healthy compound annual growth rates (CAGRs) through 2030 [4] Group 3: Dividend and Buyback Strategies - Conagra offers a higher dividend yield of 5.3%, while Lamb Weston has a lower yield but a more aggressive buyback strategy [8] - Lamb Weston reduced its share count by 2% in the first nine months of the year, with expectations for continued buybacks [8] - Conagra pays out about 55% of its earnings in dividends, while Lamb Weston pays out 45% [8] Group 4: Market Sentiment and Institutional Activity - Analysts have noted deep value in consumer staples stocks, with institutional buying activity increasing in Q4 and Q1 2025 [10][11] - Both stocks are trading near long-term lows, suggesting they may have hit bottom and are poised for a rebound [12] - The market has overcorrected for both stocks, indicating potential for significant gains in 2025 [10][12]

Core Viewpoint - Consumer staples stocks, including Lamb Weston, Conagra, and Philip Morris, experienced significant gains despite a broader market decline, highlighting their defensive nature in times of economic uncertainty [1][3]. Group 1: Company Performance - Lamb Weston reported 4% sales growth and earnings-per-share growth of just under 2% to $1.03, exceeding analyst expectations, and reaffirmed its full-year outlook [5][4]. - Conagra's sales fell 6.3% in its fiscal third quarter, with adjusted earnings per share down 23.1% to $0.51, yet management reiterated its full-year 2025 outlook of 2% sales declines and EPS of $2.35 [6][4]. - Philip Morris is perceived as recession-proof due to the addictive nature of its products and offers a 3.5% dividend yield, appealing to investors seeking stability [8]. Group 2: Market Context - The S&P 500 index fell 4.8% following tariff announcements, prompting investors to shift from economically sensitive stocks to defensive consumer staples [1][3]. - The consumer staples sector is characterized by limited growth but provides value in diversified portfolios, especially during recessions, as demand for essential products remains stable [9][10]. Group 3: Investor Sentiment - The rally in consumer staples stocks reflects investor confidence in their resilience amid economic challenges, as these companies typically maintain steady dividends [9][10]. - The market's reaction indicates a preference for safer investments, particularly for older investors or those nearing retirement [10].

Financial Performance - Net sales for the thirteen weeks ended February 23, 2025, were $2,841.0 million, a decrease of 6.3% compared to $3,032.9 million for the same period in 2024[8]. - Net income for the thirty-nine weeks ended February 23, 2025, was $896.5 million, down 2.9% from $914.9 million for the same period in 2024[8]. - Earnings per share (EPS) for the thirteen weeks ended February 23, 2025, were $0.30, a decline of 53.1% compared to $0.64 for the same period in 2024[8]. - Comprehensive income attributable to Conagra Brands, Inc. for the thirty-nine weeks ended February 23, 2025, was $889.0 million, compared to $915.1 million for the same period in 2024[11]. - Net income for the thirty-nine weeks ended February 23, 2025, was $896.5 million, down from $914.9 million for the same period in the previous year, representing a decrease of about 2.6%[16]. - Net income attributable to Conagra Brands, Inc. for the thirty-nine weeks ended February 23, 2025, was $466.8 million, compared to $284.5 million for the same period in the previous year, representing a year-over-year increase of 64%[87]. - The company reported a net income of $145.1 million for the thirteen weeks ended February 23, 2025, compared to $308.8 million in the same period last year, reflecting a decrease of 53.0%[106]. - Diluted earnings per share for Q3 fiscal 2025 was $0.30, down from $0.64 in Q3 fiscal 2024, reflecting lower net income[116]. Expenses and Costs - Selling, general and administrative expenses increased to $443.7 million for the thirteen weeks ended February 23, 2025, up 14.5% from $387.4 million in the same period in 2024[8]. - The cost of goods sold for the thirty-nine weeks ended February 23, 2025, was $6,534.7 million, a decrease of 1.2% from $6,616.5 million in the same period in 2024[8]. - Interest expense, net, for the thirty-nine weeks ended February 23, 2025, was $314.9 million, down from $325.8 million for the same period in 2024[8]. - The company recognized an impairment charge of $27.2 million in the Refrigerated & Frozen segment during Q3 fiscal 2025[97]. - The company incurred asset impairment charges of $121.3 million during the period, compared to $50.9 million in the previous year[16]. Assets and Liabilities - Total current assets decreased from $3,149.5 million to $2,965.6 million, a decline of approximately 5.8%[13]. - Total liabilities decreased from $12,351.0 million to $11,965.4 million, a reduction of about 3.1%[13]. - Cash and cash equivalents at the end of the period decreased to $49.4 million from $77.7 million, a decline of approximately 36.4%[16]. - Current liabilities increased to $4,303.7 million as of February 23, 2025, compared to $3,241.8 million as of May 26, 2024, an increase of 33.0%[13]. - Goodwill increased from $10,325.9 million as of May 26, 2024, to $10,499.8 million as of February 23, 2025, reflecting an acquisition of $176.2 million and a currency translation adjustment of $(2.3) million[51]. Acquisitions and Divestitures - The company acquired Sweetwood Smoke & Co. for $179.4 million, with $129.9 million classified as goodwill[24]. - The company completed the sale of its 51.8% ownership stake in Agro Tech Foods Limited for net proceeds of $76.8 million, recognizing a loss of $2.3 million on the sale[27]. - The company recognized a loss on divestitures of $27.2 million for the thirteen weeks ended February 23, 2025, compared to no loss in the same period in 2024[8]. Restructuring and Plans - The Conagra Restructuring Plan has incurred cumulative charges of $310.2 million, with $90.7 million recognized in the first three quarters of fiscal 2025[34]. - The company has approved a total of $345.9 million for the Conagra Restructuring Plan, with $90.1 million in cash charges and $255.8 million in non-cash charges recognized[34]. - The company initiated plans to sell businesses within its Grocery & Snacks, Refrigerated & Frozen, and International segments, recognizing an impairment charge of $27.2 million in the third quarter of fiscal 2025[30]. Cash Flow and Financing - The company reported net cash flows from operating activities of $1,346.2 million, compared to $1,531.3 million in the prior year, a decrease of approximately 12.1%[16]. - Cash used in investing activities amounted to $457.2 million in the first three quarters of fiscal 2025, compared to $295.6 million in the same period of fiscal 2024[165]. - Cash used in financing activities was $914.3 million in the first three quarters of fiscal 2025, down from $1.25 billion in fiscal 2024, reflecting long-term debt repayments of $274.8 million and cash dividends paid of $502.2 million[166]. - The company repaid $1.0 billion of its 4.30% senior notes on May 1, 2024, funded by an unsecured term loan and commercial paper[37]. Market and Economic Conditions - The company anticipates ongoing challenges related to inflation, supply chain issues, and changing consumer preferences impacting future performance[111]. - The company anticipates continued economic pressures on consumers, including high inflation and potential tariff increases, which may affect volumes[118].