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TheStreet Open House

Will ConAgra Foods (CAG) Stock Be Helped By Impending CEO Retirement?

NEW YORK (TheStreet) -- Shares of ConAgra Foods Inc. (CAG) are up slightly after it was reported that CEO Gary Rodkin is expected to retire in the next several months, sources say, paving the way for a successor who investors hope can turn around the troubled packaged foods company, Reuters reports.

The company, with a market capitalization of $13 billion, is in the early stages of identifying potential candidates to succeed Rodkin, sources added.

Rodkin, who has been CEO since 2005, has been under pressure from shareholders to fix problems resulting from the company's troubled $5 billion acquisition of private brands business Ralcorp in January 2013, Reuters said.

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TheStreet Ratings team rates CONAGRA FOODS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CONAGRA FOODS INC (CAG) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CAG, with its decline in revenue, slightly underperformed the industry average of 4.1%. Since the same quarter one year prior, revenues slightly dropped by 2.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • CONAGRA FOODS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, CONAGRA FOODS INC reported lower earnings of $0.68 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.26 versus $0.68).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food Products industry. The net income has significantly decreased by 268.7% when compared to the same quarter one year ago, falling from $192.20 million to -$324.20 million.
  • The share price of CONAGRA FOODS INC has not done very well: it is down 16.80% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
  • Currently the debt-to-equity ratio of 1.71 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, CAG has a quick ratio of 0.60, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • You can view the full analysis from the report here: CAG Ratings Report

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