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UBS initiated coverage of ConAgra Brands (NYSE:CAG) with a neutral rating and a $22 price target on Monday. The firm cited a balanced risk-reward profile for the packaged food company despite expectations of continued organic growth challenges. According to InvestingPro data, the stock is currently trading at $21.57, near its 52-week low of $21.51, while analysis suggests the shares are currently undervalued.
UBS believes ConAgra’s organic growth will fall short of the company’s low-single-digit growth algorithm over the next couple of years. The firm sees approximately 2% downside to consensus earnings per share estimates for fiscal year 2026. This aligns with InvestingPro data showing a 3.15% revenue decline in the last twelve months, though the company maintains a solid financial health score of 2.19 out of 3.
The research firm noted that market expectations for ConAgra have already been recalibrated lower, suggesting that growth concerns are largely priced into the current stock valuation. ConAgra shares are currently trading at trough multiples on both absolute and relative bases.
UBS highlighted ConAgra’s competitive dividend and free cash flow yield as factors that likely limit further downside potential for the stock. These elements contribute to the balanced risk-reward assessment that informed the neutral rating. Indeed, InvestingPro analysis reveals a remarkable 50-year streak of maintained dividend payments, with a current yield of 6.49% and a substantial free cash flow yield of 14%. For deeper insights into ConAgra’s valuation and financial health, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
The food manufacturer, whose brands include Birds Eye, Duncan Hines, and Slim Jim, has faced industry-wide challenges including shifting consumer preferences and inflationary pressures across its supply chain in recent quarters. Despite these headwinds, the company’s Altman Z-Score of 3.77 indicates solid financial stability.
In other recent news, Conagra Brands has reported several significant developments. The company agreed to sell its Van de Kamp’s and Mrs. Paul’s frozen seafood brands to High Liner Foods for $55 million in cash. This divestiture, which includes intellectual property and inventory, is expected to minimally impact Conagra’s fiscal year 2026 adjusted earnings per share by reducing it by one cent. Additionally, Conagra has finalized the sale of its Chef Boyardee brand to Hometown Food Company for $600 million. The deal includes the transfer of the Milton, Pennsylvania manufacturing facility and is expected to be completed in the second quarter of 2025.
Analyst firms have also weighed in on Conagra’s recent activities. Goldman Sachs downgraded the company’s stock from Neutral to Sell, citing margin concerns due to rising input costs and tariffs. The firm set a new price target of $21, down from $26, and projected that Conagra’s fiscal year 2026 earnings per share would fall short of consensus estimates. Meanwhile, Citi adjusted its price target for Conagra from $27 to $25, maintaining a Neutral rating. Citi noted that the sale of Chef Boyardee is expected to have a 4% dilutive effect on earnings per share, with the transaction proceeds likely directed towards debt reduction. These developments reflect Conagra’s strategic efforts to refine its product portfolio and focus on growth areas while navigating economic challenges.
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