Conagra(US:CAG) Seeking Alpha·2024-07-09 09:11Core Viewpoint - Conagra Brands is expected to show improvement in its upcoming 4Q24 earnings, with potential upside in share price due to sequential improvements in sales and profit, particularly in its largest segment, Frozen Single-Serve Meals [3][4][14] Company Overview - Conagra Brands operates in the packaged foods and meats sector with a market capitalization exceeding $13.7 billion [2] - The company has a solid operating profit and net margin, although it has faced slightly declining margins and overall sales growth [2][5] Financial Performance - The company has shown continued volume recovery in domestic retail, with strong merchandising lifts and gross margin expansion [4] - Year-to-date free cash flow conversion stands at 124%, with a 4% cost savings achieved [4] - The operating margin is reported at 15.8%, with guidance for a $2.65/share top-line for the full year [7] Market Position and Strategy - Conagra is the fourth-largest food company in the U.S., with a strong portfolio in frozen foods and snacks [10] - The company has been focusing on premiumization, with the average price per sales unit increasing from an index of 100 in 2014 to 144 in 2022 [8] - Conagra has improved its unit share in the strategic Frozen & Snacks domain to 59% [5] Valuation and Growth Potential - The company is trading at a normalized P/E of less than 11x, with potential for a share price increase to over $41, indicating significant upside [3][12] - Analysts have set an average target price of around $32/share, with a range from $29 to $34/share [13] - The company is expected to achieve an annualized upside of 15-20% per year for 2026E, even with low growth [12] Investment Thesis - Conagra is viewed as undervalued, with a projected price target of at least $36.5/share, offering an annualized upside of more than 15% including dividends [14] - The company is considered a "BUY" going into 4Q24 due to its strong product portfolio, solid earnings, and growth prospects [14][15]