Conagra Brands Is 'Improving': Why This Analyst Turned Bullish Despite Tailwinds

Shares of Conagra Brands Inc (NYSE: CAG) could end the week with gains. The company seems to be in the “early innings of a positive estimate revision cycle,” according to UBS.

The Analyst: Cody Ross upgraded the rating for Conagra Brands from Neutral to Buy, while raising the price target from $35 to $41.

The Thesis: There has been “strong momentum in the Nielsen scanner data” so far this year, Ross said in the upgrade note.

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Conagra Brands is among the few companies that are growing both volume share and household penetration, “suggesting the health of its portfolio is improving,” the analyst stated.

The company has increasing balance sheet optionality “that should provide additional levers to grow EPS at a 6% CAGR over the next three yrs (vs Street's 5% estimate),” Ross mentioned. “Despite these tailwinds, CAG's stock is lagging lg cap packaged food peers this year and is trading at a 20% discount to lg cap packaged food peers compared to its 5-yr avg of 11%,” he added.

CAG Price Action: Shares of Conagra Brands had risen by 3.09% to $36.02 at the time of publication Friday.