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

Steer Clear of ConAgra

NEW YORK ( TheStreet) -- When it rains, it pours. Unfortunately for ConAgra (CAG) shareholders, there is no shelter for a stock that has been in a perpetual decline, losing close to 20% over the past month.

While it hasn't been a "nutritious" year for the overall packaged food industry, ConAgra hasn't been able to stop the bleeding -- unlike Kraft (KRFT) and Kellogg (K), which have also faced headwinds due to weak volumes.

For all of the criticism I've unleashed towards this company this year, ConAgra's managemen has produced nothing but dismal growth and eroding margins and has yet to prove me wrong. Now, after the company issued worse-than-expected guidance last week following another disastrous quarter, investors who insist on holding this stock might as well starve themselves.

On some levels, I take it personal for how poorly managed this company is now. It's sacrilege to condemn the maker of Swiss Miss and Peter Pan peanut butter. Just a year ago the company posted a net income of $250 million. But with year-over-year profits declining 42% to $144 million, one has to wonder if ConAgra's consumer segment, which is the company's largest division, will ever recover.

Essentially, earnings, on a per-share basis, declined from 61 cents to 34 cents. Although on an adjusted basis, earnings inched up to 37 cents per share, the company still missed Street estimates by 2 cents. This prolongs what has been a poor history of execution, which has made it tough to nibble on this stock, even when shares appeared to have bottomed.

Although a case can be made the stock has reached the discount bin, the company still lags its peers in areas like returns on capital and more importantly, margins. With revenue in the consumer segment shedding another 2% this quarter combined with a 21% decline in profits, I don't think anyone can justify having a glass-half-full view, regardless of the angle.

ConAgra bulls will disagree. As have been the case for the past couple of quarters, they will play the "Ralcorp card." It's true that ConAgra's overall revenue growth did climb 27% year over year. But astute investors understand that without the acquisition of Ralcorp, virtually all of that 27% growth never would have been realized.

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 17,131.97 +100.83 0.59%
S&P 500 1,998.98 +14.85 0.75%
NASDAQ 4,552.7590 +33.8570 0.75%

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