Skip to main content

NEW YORK (TheStreet) -- ConAgra Foods (CAG) shares are down 4.86% to $34.65 in trading on Friday after the packaged food company cut its 2015 earnings outlook after the closing bell yesterday.

The Chef Boyardee and Orville Redenbacher parent company now expects full year earnings to be between $2.13 and $2.18 per share, down from its previous guidance of mid-single digit percentage growth from the $2.17 per share it reported last year. Analysts on average were expecting the company to report earnings of $2.25 per share.

Separately, the company announced that it appointed former Hillshire Brands (HSH)  chief executive Sean Connolly as its new CEO.

Exclusive Report:Jim Cramer's Best Stocks for 2015

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 some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • CAG, with its decline in revenue, slightly underperformed the industry average of 0.6%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. 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 $0.60 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.26 versus $0.60).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • 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 96.0% when compared to the same quarter one year ago, falling from $248.70 million to $10.00 million.
  • Currently the debt-to-equity ratio of 1.52 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.39, which clearly demonstrates the inability to cover short-term cash needs.
  • You can view the full analysis from the report here: CAG Ratings Report