Conagra Reshapes Portfolio, Divests Lender's Bagel Business

In sync with its efforts to reshape portfolio, Conagra Brands, Inc. CAG concluded the sale of its Lender's bagel business to Bimbo Bakeries USA, Inc. The deal involved the Lender's brand and related intellectual property, the production facility in Mattoon Ill., as well as inventory. Notably, the Lender's bagel business was part of Conagra’s Refrigerated & Frozen segment.

We note that Conagra is focused on reshaping its portfolio by acquiring high-margin businesses and divesting the less profitable ones. To this end, the company has exited private-label brands and non-key businesses, including the DSD snacks business, Wesson oil business, Gelit, the Trenton production facility, and the Canadian Del Monte business.

The company also concluded the sale of its peanut butter manufacturing facility (in Streator) after the end of the second quarter of fiscal 2020. This move forms part of Conagra’s efforts to optimize its peanut butter business. In this regard, it also decided to exit its private-label peanut butter business. Apart from this, in 2016, Conagra executed Lamb Weston’s LW spin-off.

Notably, the company’s acquisition of Pinnacle Foods (concluded in October 2018) seems appropriate, given the increasing demand for frozen foods and snacks. In fact, the consolidation of these food companies has created a robust portfolio of leading, iconic and on-trend brands. Encouragingly, this buyout drove the company’s second-quarter fiscal 2020 net sales, which advanced 18.3% year over year. Also, Conagra has generated total cost synergies of $112 billion since the acquisition.

The buyout is likely to continue boosting the company’s performance in the forthcoming period. In fact, the company raised its synergy target for fiscal 2020 from around $160 million to roughly $180 million. In previous instances, the company took over Angie's Artisan Treats, LLC (in October 2017), which is strengthening its snacking business. Sandwich Bros. buyout (completed in February 2018) has also been a valuable inclusion in Conagra’s frozen business.

These endeavors are expected to continue aiding Conagra’s transformation into a pure-play branded food company. We expect such well-chalked initiatives to fuel this Zacks Rank #3 (Hold) stock, which has rallied 19% in the past six months outperforming the industry’s growth of 5.3%.

Stocks to Consider

General Mills, Inc. GIS has a long-term earnings growth rate of 7% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Greencore Group plc GNCGY, with a Zacks Rank #2, has a long-term earnings growth rate of 8.4%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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