BofA Downgrades Conagra Brands On Challenging Year Ahead

Fiscal 2022 is likely to be a transition year for Conagra Brands Inc CAG, as management takes action to combat inflation, against tough COVID-19-related volume comparisons, according to BofA Securities.

The Conagra Brands Analyst: Bryan Spillane downgraded the rating for Conagra Brands from Buy to Neutral, while reducing the price target from $44 to $36.

The Conagra Brands Thesis: Management is trying to combat inflation by maintaining pressure on consumers with marketing and new product launches, Spillane said in the downgrade note.

“However, with the inflation-related earnings gap this year, we see the stock being range-bound until the market gets a better sense on sales and earnings growth prospects for FY23,” he added.

Conagra Brands reduced its fiscal 2022 adjusted operating margin target from 18%-19% to 16%, “driven by accelerating input cost inflation and sustained brand-building investments,” the analyst wrote.

“We lower our FY22 and FY23 estimates both from $2.62 to $2.42 and $2.56, respectively, which is below CAG’s lowered FY22 guidance of $2.50,” he added.

CAG Price Action: Shares of Conagra Brands had declined by 0.12% to $33.94 at the time of publication Wednesday.