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Category: Conagra Brands (CAG)
Date: 11 January 2021 Stock price of Conagra Brands (CAG): $34.07 We take a look at the 2nd quarter 2021 earnings report of Conagra Brands (CAG) one of North America's leading branded food companies. The company's portfolio is evolving to satisfy people's changing food preferences. Conagra's iconic brand includes names such as Birds Eye®, Marie Callender's®, Banquet®, Healthy Choice®, Slim Jim®. The group reported revenues of $2.995 billion and net income of $378 million
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Sean Connolly, president and chief executive officer of Conagra Brands -Our second quarter results reflect strong performance across the business and outstanding execution delivered by employees across the company. We exceeded expectations on net sales, profitability, and de-leveraging while continuing to invest in the business "
More About Conagra Brands
Conagra Brands, Inc. (NYSE: CAG), headquartered in Chicago, is one of North America's leading branded food companies. Guided by an entrepreneurial spirit, Conagra Brands combines a rich heritage of making great food with a sharpened focus on innovation. The company's portfolio is evolving to satisfy people's changing food preferences. Conagra's iconic brands, such as Birds Eye®, Marie Callender's®, Banquet®, Healthy Choice®, Slim Jim®, Reddi-wip®, and Vlasic®, as well as emerging brands, including Angie's® BOOMCHICKAPOP®, Duke's®, Earth Balance®, Gardein®, and Frontera®, offer choices for every occasion
Overview of Conagra Brands 2nd quarter 2021 earnings report
- Second quarter net sales increased 6.2%, and organic net sales increased 8.1%, with significant growth in each of the Company's three retail segments on both a reported and an organic basis.
- Total Company operating margin increased 250 basis points to 17.7%, and adjusted operating margin increased 250 basis points to 19.6%.
- Diluted earnings per share from continuing operations (EPS) for the second quarter grew 45.3% to $0.77, and adjusted EPS grew 28.6% to $0.81.
- From the close of the Pinnacle Foods acquisition through the end of the second quarter, the Company has reduced its gross debt by $2.3 billion; this reduction in debt, together with strong earnings, enabled the Company to achieve its targeted Net Leverage Ratio ahead of schedule.
- The Company is providing guidance for the third quarter of fiscal 2021:
- Organic net sales growth is expected in the range of +6% to +8%
- Adjusted operating margin is expected in the range of 16.0% to 16.5%
- Adjusted EPS is expected in the range of $0.56 to $0.60
- The Company is reaffirming its fiscal 2022 guidance, which does not yet include the impact of the pending sale of the Peter Pan peanut butter business.
Conagra Brands management commentary on their 2nd quarter 2021 earnings report
CHICAGO, Jan. 7, 2021 /PRNewswire/ -- Today Conagra Brands, Inc. (NYSE: CAG) reported results for the second quarter of fiscal year 2021, which ended on November 29, 2020
CEO Perspective
Sean Connolly, president and chief executive officer of Conagra Brands, commented, "Our second quarter results reflect strong performance across the business and outstanding execution delivered by employees across the company. We exceeded expectations on net sales, profitability, and de-leveraging while continuing to invest in the business. We have continued to selectively invest in production capacity and marketing support to increase the availability and awareness of our products to maximize long-term brand health."
He continued, "We remain confident that Conagra Brands is well-positioned to capture the benefits of the shifting consumer behavior, many of which we believe will continue well into the future. The continued business momentum, coupled with our disciplined approach to investment, reinforce our confidence in the long-term potential of the business and our ability to create sustained value for our shareholders."
CEO Perspective
Sean Connolly, president and chief executive officer of Conagra Brands, commented, "Our second quarter results reflect strong performance across the business and outstanding execution delivered by employees across the company. We exceeded expectations on net sales, profitability, and de-leveraging while continuing to invest in the business. We have continued to selectively invest in production capacity and marketing support to increase the availability and awareness of our products to maximize long-term brand health."
He continued, "We remain confident that Conagra Brands is well-positioned to capture the benefits of the shifting consumer behavior, many of which we believe will continue well into the future. The continued business momentum, coupled with our disciplined approach to investment, reinforce our confidence in the long-term potential of the business and our ability to create sustained value for our shareholders."
Outlook
The ultimate impact of the COVID-19 pandemic on the Company's full year fiscal 2021 consolidated results remains uncertain. The Company continues to expect demand in retail channels to remain elevated and demand in foodservice channels to remain challenged versus historical norms. However, the degree and timing of changes in retail and foodservice demand levels are difficult to predict with enough certainty to provide a full-year outlook at this time.
In the third quarter to-date, the Company has seen a sustained increase in demand in its retail segments. The Company has also continued to see reduced demand in its Foodservice segment when compared to pre-COVID-19 demand levels. COVID-19-related costs have also continued to impact the business. Based on these factors, the Company is providing the following third quarter fiscal 2021 guidance:
The Company is reaffirming its fiscal 2022 guidance of:
The ultimate impact of the COVID-19 pandemic on the Company's full year fiscal 2021 consolidated results remains uncertain. The Company continues to expect demand in retail channels to remain elevated and demand in foodservice channels to remain challenged versus historical norms. However, the degree and timing of changes in retail and foodservice demand levels are difficult to predict with enough certainty to provide a full-year outlook at this time.
In the third quarter to-date, the Company has seen a sustained increase in demand in its retail segments. The Company has also continued to see reduced demand in its Foodservice segment when compared to pre-COVID-19 demand levels. COVID-19-related costs have also continued to impact the business. Based on these factors, the Company is providing the following third quarter fiscal 2021 guidance:
- Organic net sales growth of +6% to +8%
- Adjusted operating margin of 16.0% to 16.5%
- Adjusted EPS of $0.56 to $0.60
The Company is reaffirming its fiscal 2022 guidance of:
- Organic net sales growth (3-year CAGR ending fiscal 2022) of +1% to +2%
- Adjusted operating margin of 18% to 19%
- Adjusted EPS of $2.66 to $2.76
- Free cash flow conversion (percentage of adjusted net income 3-year average) of 95+
Conagra Brands (CAG) stock price history over the last 5 years
The image below shows the stock price history of Conagra (CAG) over the last 5 years. And its not been a good time for Conagra stockholders with the stock declining by -14.9% over the last 5 years. Not the type of returns any investor would like to see.
The stock of Conagra is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Conagra's stock is positive at this point.
The stock of Conagra is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Conagra's stock is positive at this point.
Latest stock valuation of Conagra Brands
So what is Conagra stock worth based on their 2nd quarter 2021 earnings report and the fiscal guidance provided by the group? Based on their earnings report our valuation model provides a target price (full value price) for Conagra at $44.50 a stock.
We therefore believe the stock of Conagra is undervalued at its current price of $34.07
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $44.50 thus a good entry point into Conagra would be at $40 or below.
We expect the stock of Conagra to kick up from from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is undervalued. Since the stock of Conagra is trading at well below our suggested entry point we rate their stock as a buy
We therefore believe the stock of Conagra is undervalued at its current price of $34.07
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $44.50 thus a good entry point into Conagra would be at $40 or below.
We expect the stock of Conagra to kick up from from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is undervalued. Since the stock of Conagra is trading at well below our suggested entry point we rate their stock as a buy
Next earnings release of Conagra Brands
It is expected that Conagra will release their 3rd quarter 2021 earnings report in early April 2021
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