Conagra (CAG) Stock Drops After Earnings Miss

Core Insights - Conagra Brands experienced a significant stock price decline of 9.95% to $29.465 following a disappointing earnings report for fiscal Q1 2025 [1] - The company reported earnings of $0.53 per share, missing the forecast of $0.59, with sales falling short of the anticipated $2.8 billion [1][2] - Adjusted earnings fell by 20%, while GAAP earnings rose by 45% due to a one-time $210 million income tax benefit [1] Financial Performance - Sales decreased by 4% in Q1, and operating profit margins dropped nearly 250 basis points to 14.4% [1] - Conagra anticipates adjusted earnings for fiscal 2025 to be between $2.60 and $2.65 per share, with a predicted smaller sales decline and improved operating profit margins of 15.6% or higher [2] - The company expects to convert 90% of operating profit to free cash flow, amounting to at least $1.1 billion for the year [2] Valuation Metrics - Conagra's GF Value is $35.33, indicating the stock is modestly undervalued [2] - The stock's PE ratio is 40.36, close to its 10-year high, suggesting potential overvaluation based on historical earnings [2] - The price-to-book ratio stands at 1.67, which is relatively moderate compared to the industry [2] Dividend and Financial Health - The company's dividend yield is 4.76%, which is attractive compared to peers [3] - Conagra's Altman Z-Score is 1.92, indicating some financial stress but not at bankruptcy levels [3] - The Beneish M-Score of -3.03 suggests it is unlikely to be a manipulator, which is a positive sign for investors [3] Future Outlook - Despite recent setbacks, Conagra's strategic initiatives aimed at improving profit margins and converting a significant portion of operating profit into free cash flow could bode well for its long-term growth [3]