We are maintaining our Neutral recommendation on
). The company's continued business portfolio expansion and cost
moderation efforts leveraging on the value-added opportunities
through the acquisition of private labels.
The food maker has been significantly expanding its business
portfolio over time, focusing on strategic acquisitions as well as
existing capabilities. The company's promotional campaigns, strong
sales force, dedicated customer-serving teams, and category
leadership continue to add depth and dynamism to its existing
Strong productivity and robust cost saving in both the
Commercial and Consumer food segments have been boosting the
company's revenue growth for quite some time. In addition, ConAgra
expects the rate of input cost inflation to moderate in the
upcoming quarter. The recent signs of modest job recovery in the US
and the anticipation of receding gasoline prices raise hope.
However, concern remains as we anticipate food and fuel
inflation to take a huge toll in the coming quarters.Various raw
materials used in the food industry are exposed to market
fluctuations, supply-demand inconsistency and changes in
governmental agricultural programs. Thesewill continue to raise
cost and have a negative impact on the company's operations.
Moreover, the food industry in recent times is backed by value
oriented price sensitive consumers, who prefer to spend more
cautiously due to unemployment and housing pressures. Prevailing
macroeconomic conditions are thus making it difficult for the
company to raise prices even on the back of rising costs.
The food industry is intensely competitive, facing challenges
from private label suppliers as well as big banners like
HJ Heinz Co. (
Kraft Foods Inc
). Therefore, fierce competition may shrink the company's market
shares and eat into ConAgra's profits.
ConAgra retains a Zacks #3 Rank, implying a short-term (1-3
months) 'Hold' rating.
CONAGRA FOODS (CAG): Free Stock Analysis Report
HEINZ (HJ) CO (HNZ): Free Stock Analysis Report
KRAFT FOODS INC (KFT): Free Stock Analysis
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