Conagra Down 12% in Three Months: Solid Bargain or Risky Bet

Core Insights - Conagra Brands, Inc. (CAG) has experienced an 11.9% decline in share price over the past three months, contrasting with a 1.1% decline in the industry, attributed to broader market dynamics and specific company challenges [1][8] - The stock has reached a 52-week low of $21.81, closing at $22.28, and is trading below key technical levels, indicating ongoing bearish pressure [3][8] Financial Performance - The Foodservice segment reported a 6.1% year-over-year decline in sales to $256 million, with organic sales down 6.3% due to a 10% drop in volumes, reflecting weak commercial traffic amid macroeconomic pressures [4] - The international segment saw a 17.6% year-over-year decline in net sales to $224 million, with foreign exchange headwinds contributing 8.5 percentage points to this decline [5] - Adjusted gross profit fell 19.1% to $704 million, and adjusted gross margin narrowed by 389 basis points to 24.8%, driven by inflation around 4% and unfavorable operating leverage [6][8] Earnings Outlook - For fiscal 2025, Conagra projects a 2% decline in organic net sales, with adjusted operating margin expected to decrease to 14.4% from 16% a year ago, and adjusted earnings per share (EPS) forecasted at $2.35, down from $2.67 [9][8] - The company reaffirmed its fiscal 2025 outlook despite acknowledging ongoing operational disruptions [9] Strategic Initiatives - Conagra is actively reshaping its portfolio to adapt to evolving consumer preferences, focusing on innovation, brand modernization, and strategic acquisitions while exiting low-growth businesses [10] - The company has a diverse portfolio across frozen, snacks, and staples, which positions it to capitalize on multiple consumer trends and mitigate risks from individual category fluctuations [11] Valuation - Conagra currently trades at a forward 12-month price-to-earnings ratio of 9.47X, below the industry average of 16.06X, suggesting it may be undervalued [12]