Conagra Earnings: Planning to Trim Valuation as Volume Recovery Remains Elusive

Macroeconomic challenges continued to weigh on results in no-moat Conagra’s second fiscal quarter as a value-conscious consumer drove organic net sales down 3.4%, worse than the prior quarter’s 0.3% decline. Although we expect consumers to normalize their buying behavior as inflation cools, we also expect both product investment and merchandising expenses to rise as competition intensifies. Given this outlook and the results, we expect to cut our fair value estimate of $33 per share by a dollar or two. Shares remain slightly undervalued, but we see more attractive risk-adjusted upside among other food names, including best-idea Tyson Foods.