This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

I'm Off the ConAgra Diet

NEW YORK ( TheStreet) -- The on-again/off-again love affair that the market has had with packaged food giant ConAgra (CAG - Get Report) appears to be off.

As is often the case, retail investors, who don't seem to fully grasp ConAgra's business, are left holding the "shopping" bag. The stock is down 17% over the past month. And with organic growth and margins still a concern, it's anyone's guess when the bleeding will stop.

On Tuesday, the company lowered its fiscal 2014 earnings per share expectations by 2.5% to a range of $2.34 to $2.38.

True, ConAgra isn't the only company struggling with growth. Companies such as Nestle (NSRGY), which has become the gold standard in this industry, haven't exactly outperformed.

And Kraft (KRFT) and Kellogg (K) have taken their lumps.

But this is not the first time that ConAgra has frustrated investors. Truth be told, as much as I've wanted to like this company, its poor history of execution has made that tough. It has lagged its peers in the most important categories, including stock performance, returns on capital and, most recently, margins.

What's more, contrary to what management has proclaimed, I don't believe that ConAgra is any closer today to resolving its profitability issues than it was, say, a year ago, prior to its deal for Ralcorp. ConAgra bulls will certainly disagree. And they will cite the possible 8% to 10% growth in EPS, even with the company's revised estimates.

But we can't discount the impact the lowered guidance will have on ConAgra's first-quarter results.

What's more, ConAgra's management has not found adequate ways to offset its underperformance, unlike Coca-Cola (KO) and PepsiCo (PEP), which have faced the challenge of poor unit volumes.

Here again, bulls will respond that the company will grow earnings by as much as 10% in the next quarter. But as I pointed out in the introduction, how much of that growth will be organic?

Consolidation happens quickly and frequently in this sector, so analysts are right to look at company performance using internal resources and exclude events like acquisitions.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CAG $44.90 0.27%
AAPL $93.28 -0.36%
FB $118.20 0.12%
GOOG $699.76 0.58%
TSLA $212.62 -4.50%


Chart of I:DJI
DOW 17,694.78 +43.52 0.25%
S&P 500 2,055.41 +4.29 0.21%
NASDAQ 4,732.6950 +7.0560 0.15%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs