Conagra Earnings: Prudent Execution Paves the Way for Profitability Gains; Shares Remain Undervalued

Conagra closed its (May-ended) fiscal 2023 book with solid results—organic net sales were in line with our $3 billion estimate and adjusted EPS of $0.62 outpaced our $0.55 forecast. However, a bland fiscal 2024 outlook of 1% organic net sales growth and $2.70-$2.75 in adjusted EPS (we had forecast 2.1% and $2.70, respectively) on softer demand expectations should leave our $46.50 fair value estimate largely unchanged. Shares still appear attractive, trading 30% below our valuation. We remain optimistic about Conagra’s long-term margin improvement prospects, with our forecast calling for 18% adjusted operating margins long-term (from 14.6% in fiscal 2023), supported by a normalized cost environment and ongoing supply chain initiatives.