This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
TheStreet Open House

Before Buying ConAgra, Read the Label

Stocks in this article: CAGCPBKOPEPYUM

NEW YORK ( TheStreet) -- Packaged-food giant ConAgra (CAG) will report fiscal first-quarter results on Thursday before markets open.

Investors want to know if now's the best time to check out ConAgra. Perhaps. But I suggest we first read the label.

While ConAgra, which recently acquired Ralcorp, continues to take decent strides to synergize both businesses, management has been unable to address eroding margins and poor organic growth. ConAgra recently lowered its fiscal 2014 earnings-per-share guidance by 2.5%. I don't believe we can continue to pretend that meaningful operational improvements are imminent.

To that end, even though the stock has been down by as much as 17% over the past month, I'm just not yet ready to apply ConAgra to my value diet. On Thursday, I don't believe there is anything management will say to alter the near-term view of the company. From a market reaction point of view, there likely won't be any negative surprises either.

The company has already "pre-announced" the important details of the quarter, including what amounts to a four-year plan. Last week the company lowered its full-year earnings-per-share expectations from a high of $2.40 to a range of $2.34 and $2.38 per share. While this does suggest as much as a 10% year-over-year improvement, very little of that growth is organic.

I've raised this point recently while discussing Campbell Soup Company (CPB), which, like ConAgra, has struggled with "real growth" for quite some time. Bulls have long argued how this metric is exaggerated. But I disagree, especially given the nature of this sector and how quickly consolidations occur.

Organic growth, which measures a company's operational performance using only internal resources and excluding events like acquisitions, continues to be one of the best identifiable metrics (or "labels," if you will) when buying these stocks. Plus, it's anyone's guess when weak shipping volumes, which have also plagued (among others) Coca-Cola (KO), are going to rebound.

Unlike PepsiCo (PEP), which has navigated the weak volume environment with partnerships like Yum! Brands (YUM) and the Doritos Locos Tacos of Taco Bell, ConAgra doesn't have that type of a card to play to offset what remains as challenging conditions. Management talked about steps that it's taking to improve sales performances. That's all well and good. But it assumes customers have suddenly been turned off by the company's many household brands including Swiss Miss, PAM and Healthy Choice.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs