Zacks Investment Research upgraded shares of ConAgra Foods, Inc. (CAG) from NEUTRAL to OUTPERFORM on February 25, 2013, with a target price of $41.00.
We are upgrading our recommendation on ConAgra to Outperform from Neutral. The recent acquisition of Ralcorp will boost the company's revenue and will also reduce costs due to synergies. In view of the post acquisition scenario, management revised upwards its earnings expectations for fiscal 2013. It is also expected that besides increased debt used to fund the Ralcorp acquisition, the current dividend pay-out of $1.00 per share will be maintained and increased further in the future. The company reported impressive fiscal second-quarter 2013 results as well. Adjusted earnings per share came in at $0.57, up from $0.49 in the year-ago quarter and 3.6% above the Zacks Consensus Estimate. Net sales grew 8.9% from the year-earlier quarter to $3,736 million, which can be attributed to improved pricing, moderating inflation and contribution from acquired businesses. However, ConAgra is involved in plenty of promotional activities which raise the total expenditures for the company. Also, stiff competition and the prevailing inflation, though less severe than before, remain a nagging concern.
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