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Conagra Brands Inc CAG

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Morningstar’s Analysis

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Conagra’s Brands Continue to Perform Well in Challenging Environment; Shares Look Appetizing

Analyst Note

| Rebecca Scheuneman, CFA |

We think no-moat Conagra is managing well in the current environment, which is fraught with labor shortages, supply chain disruption, and inflation. Although these challenges have prevented Conagra from filling some orders, it still managed to post 7% two-year organic growth (flat year over year) in its August-ended fiscal first quarter. We’re encouraged that Conagra continues to perform well relative to its peers, with IRI data showing yet another quarter of market share gains (80 basis points), as well as household penetration gains and repeat purchase rates that exceed the average of its top 15 peers. These data give us confidence in our long-term thesis on Conagra, that its turnaround efforts under CEO Sean Connolly are bearing fruit and should lead to 2% organic sales growth and 19% operating margins in the next few years.

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Company Profile

Business Description

Conagra Brands is a packaged food company that operates predominantly in the United States (over 90% of revenue and profits). It has a significant presence in the freezer aisle, with brands such as Marie Callender’s, Healthy Choice, Banquet, and Birds Eye. Other popular brands include Duncan Hines, Hunt’s, Slim Jim, Vlasic, Orville Redenbacher's, Reddi-Wip, Wish-Bone and Chef Boyardee. While the majority of revenue is sold into the U.S. retail channel, 7% of fiscal 2021 sales were to the food-service channel, down from 11% in fiscal 2019 due to the pandemic.

222 W. Merchandise Mart Plaza, Suite 1300
Chicago, IL, 60654
T +1 312 549-5000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Aug 31, 2021
Fiscal Year End May 31, 2022
Stock Type High Yield
Employees 18,600