
Will ConAgra Foods (CAG) Stock Be Helped by Possible Sale of Ralcorp?
NEW YORK (TheStreet) -- Shares of ConAgra Foods (CAG) - Get Report are down by 1.58% to $41.73 in mid-morning trading on Friday, despite reports that the company is in talks to sell its private label business, Ralcorp, to Treehouse Foods (THS).
The deal could be valued between $2.5 billion and $2.7 billion, sources told Reuters, though there is no certainty that an agreement will be reached.
Ralcorp was sold to ConAgra, which makes packaged foods like Chef Boyardee and Slim Jim, for $5.1 billion in 2013.
However, the person who helped broker the acquisition of Ralcorp, CEO Gary Rodkin, left the company earlier this year.
New CEO Sean Connolly made it clear that the company would be exiting the private label business during an earnings call in June.
Earlier this month Conolly announced cost-cutting plans that included cutting about 1,500 jobs and moving the company headquarter to Chicago from Omaha, NE.
Separately, TheStreet Ratings team rates CONAGRA FOODS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate CONAGRA FOODS INC (CAG) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 9.0%. Since the same quarter one year prior, revenues slightly increased by 1.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- CONAGRA FOODS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CONAGRA FOODS INC swung to a loss, reporting -$1.49 versus $0.35 in the prior year. This year, the market expects an improvement in earnings ($2.26 versus -$1.49).
- The debt-to-equity ratio is very high at 2.34 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.25, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Food Products industry and the overall market, CONAGRA FOODS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: CAG








