Conagra’s Third-Quarter Margin Improvements Bode Well for Its Near-Term Outlook; Shares Attractive

Our $44.50 per share valuation of no-moat Conagra should rise by a low- to mid-single-digit percentage after the company announced solid third-quarter (period ended Feb. 26) results, including 6% organic net sales growth and a little over 320 basis points of adjusted operating margin improvement (to 16.9%). The strong recent performance does not materially alter our long-term forecast (2% revenue growth, 17% average operating margins over the next decade). We believe the shares are somewhat attractive as market sentiment likely underestimates Conagra’s long-term margin prospects.