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On Tuesday, Evercore ISI reiterated its In Line rating and $31.00 price target for ConAgra shares (NYSE:CAG), while adjusting its financial expectations for the company. Currently trading at $25.35, the stock has declined about 18% over the past six months. According to InvestingPro data, analyst targets for CAG range from $24.00 to $31.13, with the company currently showing a significant dividend yield of 5.44%. Evercore ISI pointed to several factors influencing its outlook, including specific challenges ConAgra is facing such as supply chain issues in its vegetable and chicken segments, potential tariff impacts from Mexico, and questions about the company’s pricing power.
The research firm noted that despite ConAgra’s frozen business and protein-forward snack categories performing well due to innovation and promotional activities, these positives are overshadowed by company-specific headwinds. These difficulties have led Evercore ISI to lower its fiscal year 2025 earnings per share (EPS) estimate from $2.45 to $2.33, which represents a 13% year-over-year decrease, and is slightly below the consensus of $2.35. This aligns with InvestingPro data showing seven analysts recently revising their earnings expectations downward, though the company maintains strong fundamentals with a 50-year track record of consistent dividend payments. Organic sales expectations were also revised from a 1% decline to a 2% decline, aligning with the consensus.
The report highlighted that supply chain disruptions, particularly in the chicken segment used in frozen entrees, could continue to impact sales and lead to increased costs, such as the use of third-party chicken manufacturers, into the fourth quarter of fiscal 2025. Consequently, this may persist as a headwind for the company.
Looking ahead to fiscal year 2026, Evercore ISI trimmed its organic sales growth forecast from 1% to 0.5%, which is below the consensus estimate of 1%. The EPS estimate for FY26 was also reduced by 5% to $2.44, which would be a 5% increase year-over-year, compared to a consensus of $2.46. The $31 price target set by Evercore ISI is based on approximately 12 times the projected CY26 EPS, representing a slight discount to the midpoint price-to-earnings ratio of 13 times, based on a five-year two-standard deviation near-term range of 10-16 times. The firm is awaiting further information to determine if ConAgra can achieve both sales and profit growth in FY26. Based on comprehensive InvestingPro analysis, which includes over 30 financial metrics and exclusive Fair Value calculations, CAG currently appears undervalued, with strong free cash flow yield and robust shareholder returns despite near-term challenges.
In other recent news, ConAgra has faced several significant developments impacting its financial outlook and market position. Citi analysts have revised their price target for ConAgra to $27, maintaining a Neutral rating, due to supply challenges affecting organic sales growth and profit margins, particularly with chicken and vegetables. ConAgra has also adjusted its financial expectations for fiscal year 2025, citing these supply issues as a major factor impacting third-quarter earnings per share. In a similar vein, JPMorgan has lowered its price target for ConAgra from $29 to $26 while maintaining a Neutral rating, highlighting concerns about the company’s slower-than-expected debt reduction and complex portfolio.
Goldman Sachs has downgraded ConAgra’s stock from Buy to Neutral, cutting the price target to $26 from $33, due to operational challenges and intensified competition in the frozen food sector. Meanwhile, Morgan Stanley (NYSE:MS) initiated coverage with an Equalweight rating and a $27 price target, noting ConAgra’s appealing valuation and dividend yield but expressing caution over supply chain execution risks and cost inflation. Additionally, ConAgra, along with other major food corporations, is advocating for tariff exemptions on certain imports to protect manufacturers and reduce consumer inflation. These recent developments reflect the various challenges and strategic adjustments ConAgra is navigating in the current economic landscape.
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