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Conagra Brands Inc CAG

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Morningstar’s Analysis

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We Think No-Moat Conagra Shares Look Attractive, as It Competently Navigated Q2 Pandemic Aftershocks

Analyst Note

| Rebecca Scheuneman, CFA |

Conagra’s November-ended fiscal second-quarter organic sales grew 2% versus our flat estimate, with the upside driven by a price/mix contribution of 6.8%. At-home food sales remain elevated from 2019, with Conagra’s two-year sales CAGR at 5.3%. While we believe the mix of away-from-home food consumption will revert to the 50% pre-pandemic level for most grocery categories, we are encouraged by the changes Conagra has made in its brand-building practices (a switch to data-driven consumer insights, and a shift of marketing dollars to more productive digital channels). These efforts have improved the relative performance of Conagra’s brands, with the firm reporting second-quarter market share gains of 41 basis points in the past two years, per IRI. That said, Conagra's under-investment relative to peers weakens our confidence in the firm’s ability to sustain strong brands, resulting in our no-moat rating.

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Company Profile

Business Description

Conagra Brands is a packaged food company that operates predominantly in the United States (over 90% of revenue and profits). It has a significant presence in the freezer aisle, with brands such as Marie Callender’s, Healthy Choice, Banquet, and Birds Eye. Other popular brands include Duncan Hines, Hunt’s, Slim Jim, Vlasic, Orville Redenbacher's, Reddi-Wip, Wish-Bone and Chef Boyardee. While the majority of revenue is sold into the U.S. retail channel, 7% of fiscal 2021 sales were to the food-service channel, down from 11% in fiscal 2019 due to the pandemic.

222 W. Merchandise Mart Plaza, Suite 1300
Chicago, IL, 60654
T +1 312 549-5000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Nov 30, 2021
Fiscal Year End May 31, 2022
Stock Type High Yield
Employees 18,600