On Sep 25, 2014, we issued an updated research report on ConAgra Foods, Inc. (CAG). The company is one of the leading food companies in North America. Popular brands by the company can be found in roughly 97% of American households.
Prospects for ConAgra Foods’ organic revenue growth are bright. For fiscal 2015, the company expects improved results in Consumer Foods backed by better potato crop quality, and hopes for the Lamb Weston potato business to drive the Commercial Foods business. Volume would improve for Private Brands.
The company’s inorganic growth outlook appears promising as well. The Ardent Mill transaction (formation of a flour-milling company by combining related businesses of ConAgra, Cargill and CHS) is expected to be accretive to earnings per share in the years ahead. In addition, the Ralcorp acquisition made ConAgra Foods the largest private-brand packaged food company in North America.
ConAgra Foods is committed towards rewarding its shareholders handsomely through dividend payments and share buybacks, reflecting its strong cash position. The company expects to maintain its annual dividend payment of $1.00 per share in the years ahead.
However, ConAgra Foods faces intense competition from manufacturers of branded, private brand and customized food products. This reduces the company’s price control over its products, which may result in market share loss, and a fall in sales and operating margins. Also, the company’s international operations expose it to various economic as well as geo-political issues. At the same time, adverse movements in foreign currency transactions can affect its financials negatively.
Some other important players in the food industry include Aramark (ARMK), Boulder Brands, Inc. (BDBD) and The Hain Celestial Group, Inc. (HAIN).
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