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Stock Strategist

Conagra Looks Appetizing

Its brands continue to perform well in a challenging environment.

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Conagra (CAG) has made many changes to improve its growth and profit margin profile since Sean Connolly stepped in as CEO in 2015. Significant portfolio reshaping has improved the company’s weighted average category growth to 2.4% from about 1%, by our estimate, while more-effective innovation practices have increased the level of incremental sales generated from new products to 17% of total sales from 9% despite a similar level of investment. In addition, the company’s total category-weighted market share increased to 29.0% from 27.4% the last four years, while adjusted operating margins improved to 16.5% from 10.8% over the past six years. We think the pandemic accelerated Conagra’s turnaround efforts, as the health crisis resulted in four and a half years of incremental new buyers and saved the company hundreds of millions of dollars in customer acquisition costs, according to management.

Rebecca Scheuneman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.