Lamb Weston Is the Better Choice on a Performance Basis
On the other hand, Conagra underperformed due to weakness in organic sales and pricing; however, it reaffirmed its FY guidance and expects a solid Q4.
Each delivered favorable guidance aligning with the analysts’ consensus reported by MarketBeat. Both are forecasting contractions in full-year revenue.
The critical detail is that both expect margin strength and cash flow improvement due to internal efficiencies and positioning efforts sufficient to sustain mutually robust capital returns. Both are expected to revert to revenue growth in 2026 and maintain healthy CAGRs through 2030.
Capital Returns: Consumer Staples Are About Capital Returns
Growth is important to a consumer staple stock's price direction but is not the only factor involved. These companies tend to be large and grow in slow, cyclical spurts; the critical details are cash flow, capital returns over time, and sustainability. In this case, capital returns include dividends and repurchases.
Comparatively speaking, Conagra’s dividend is more significant, yielding 5.3% in early April 2025, while Lamb Weston has a better buyback. Buybacks reduced the count by 2% in the first nine months of the year and are expected to continue strongly in Q4 and F2026.
Conagra’s buybacks are much smaller. However, they are sufficient to reduce the share count annually and increase shareholder leverage.
Regarding dividend safety, Conagra pays about 55% of its earnings, and Lamb Weston pays 45%.
Analysts and Institutions Indicate Deep Value in Consumer Staples Stocks
The analysts' trends in late 2024 and early 2025 include some price target reductions and downgrades. Still, the markets for CAG and LW stock overcorrected, opening up profound value opportunities highlighted by institutional activity. LW trades well below the analysts’ lowest price target and CAG at the analysts’ floor, indicating a double-digit upside at the consensus, and the institutions are buying.
Institutional activity in these stocks reverted to buying on balance from selling in Q3 and then ramped in Q4 and Q1 2025. The Q1 2025 activity set a multi-year high, indicating a solid support base and a low likelihood of significantly lower prices.
Technically, the stocks are trading near long-term lows and at value levels. Recent activity suggests they’ve hit bottom and are setting up to rebound. The question is how high the stock prices may get, and it could be a significant gain in 2025. Macroeconomic headwinds are cutting into the growth outlook for stocks across sectors and industries, making low-beta, capital-returning stocks like these very attractive.
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The article "2 High-Yield Values for Dividend Growth and Capital Gains" first appeared on MarketBeat.
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