Conagra Analysts React To Q4 Miss: 'We View These Issues As Temporary'

Conagra Brands Inc (NYSE: CAG) reported a fourth-quarter earnings miss Thursday, but two bull analysts were unfazed. 

The Analyst

Bank of America Merrill Lynch's Bryan Spillane reiterated a Buy rating on Conagra with an unchanged $35 price target.

Citi's David Driscoll maintained at Buy with a price target lowered from $36 to $34.

BofA: Q4 Issues Temporary 

Conagra's EPS miss, at 36 cents versus expectations of 41 cents, was likely driven by temporary and transitory issues, Spillane said in a Friday note. 

They include the following, the analyst said:

• The Ardent Mills joint venture had a 2-cent-per-share impact due to lower wheat prices and less volatility.
• Another 2-cent impact came from manufacturing issues related to PF Chang's, Peter Pan and Duke's.
• Price increases in Hunt's and Chef Boyardee had a 1-cent impact.
• Conagra lost Marie Callender's merchandising events to a competitor. 

"We view these issues as temporary and addressable and continue to see CAG as well-positioned to capitalize on its product innovation and synergy plans," Spillane said. 

Citi: 'Right The Ship'

Conagra increased its organic revenue growth guidance from 1% to a range of 1-1.5%, Driscoll said in a Thursday note. 

Conagra is in a position to "right the ship" at Pinnacle, which the company assumed control of in late 2018, by applying its proven "playbook", the analyst said. 

Looking forward to the next six months, Conagra's stock is unlikely to appreciate as investors wait for signs of organic revenue turning positive, Driscoll said. Nevertheless, the stock sold off 12% in reaction to Thursday's report, and shares are trading at 12 times fiscal 2020 EPS, which suggests upside potential at the point of revenue inflection, he said. 

Price Action

Conagra shares were trading higher by 4.33% at $26.53 at the time of publication Friday. 

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