ConAgra stock price target lowered to $20 at Wells Fargo on reset concerns

Investing.com - Wells Fargo (NYSE:WFC) has lowered its price target on ConAgra (NYSE:CAG) to $20.00 from $22.00 while maintaining an Equal Weight rating on the food company’s stock. The company currently trades at $19.49, near its 52-week low of $18.82, with InvestingPro analysis suggesting the stock is in oversold territory.

The price target reduction follows ConAgra’s fourth-quarter fiscal 2025 results and fiscal year 2026 outlook, which Wells Fargo described as a necessary reset that was larger than anticipated. The firm noted that despite ConAgra trading at historically low valuations - with a P/E ratio of 8.49x and offering a substantial 7.18% dividend yield - questions remain about whether estimates have bottomed out. InvestingPro analysis indicates the stock is currently undervalued, with 12 additional key insights available to subscribers.

Wells Fargo expressed concerns about ConAgra’s sales trajectory and gross margin execution. While the company’s organic sales guidance of -1% to +1% represents an improvement from the -3.5% exit rate in the fourth quarter, the firm indicated that improvement on easy comparisons has been challenging across the food sector. The company’s current gross profit margin stands at 25.81%, according to InvestingPro data, which offers comprehensive analysis through its Pro Research Reports covering over 1,400 US stocks.

The analyst report highlighted margin pressures, noting that gross margins need to reach approximately 24% (down about 200 basis points) to achieve the company’s operating margin outlook of 11-11.5%. This would require significant productivity gains of around 250 basis points, which Wells Fargo characterized as "historically high, not unattainable."

Based on these factors, Wells Fargo lowered its fiscal 2026 earnings per share estimate to $1.75 from $2.11 and reduced its price target to $20, representing a 10.5x multiple on calendar year 2026 estimated earnings, while noting the stock may struggle to gain support until the outlook becomes more certain.

In other recent news, ConAgra Brands reported disappointing results for its fourth quarter of fiscal 2025, missing both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $0.56, below the expected $0.59, and revenue of $2.78 billion, which fell short of the anticipated $2.85 billion. As a result, BofA Securities lowered its price target for ConAgra to $18.00, maintaining an Underperform rating due to a weak fiscal year 2026 outlook. This outlook includes projected organic sales growth between -1% and +1% and an operating margin of approximately 11-11.5%.

ConAgra faces significant cost pressures, with an overall inflation expectation of 7%, driven by core inflation and tariffs. The company anticipates a challenging first half of fiscal 2026, with improvements expected in the latter half. Despite these challenges, ConAgra plans to pay down $700 million in debt this year and continue investing in innovation and premiumization, particularly in its frozen and snacks categories. As part of its strategy, ConAgra is focusing on maintaining brand strength and consumer connections, despite ongoing inflationary pressures and competitive market conditions.

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