UBS: Buy The Weakness In Conagra Brands

Conagra Brands Inc CAG, the parent company of food brands like Hebrew National hot dogs and Pam cooking spray, have lost around 10 percent in the past two weeks, and investors should consider buying the dip, according to UBS.

The Analyst

UBS' Steven Strycula upgraded Conagra Brands from Neutral to Buy with a price target lifted from $38 to $40. 

The Thesis

Conagra's stock weakness could be attributed to multiple concerns that are "overstated," Strycula said in the upgrade note. (See his track record here.) 

They are:

• A slowdown in total sales, including the contribution from the soon-to-be-finalized Pinnacle acquisition.
• The size of the equity offering to finance the transaction.

The Pinnacle acquisition should close by the end of October, and synergies from the deal should come in ahead of Street estimates, the analyst said. Favorable expectations for the transaction should help Conagra's stock re-rate from its current valuation discount to its peers to a premium valuation, he said. 

Price Action

Conagra Brands shares were up 2.83 percent at $34.54 at the time of publication Monday. 

Related Links:

Some Perspective On A Possible Pinnacle Foods Buyout

4 Reasons Analysts See Upside In Conagra Shares