NEW YORK (TheStreet) -- ConAgra Foods (CAG) - Get Report will report fourth-quarter fiscal 2015 earnings results Tuesday before the opening bell. Known for popular brands like Orville Redenbacher's, Hunt's, Chef Boyardee, and Slim Jim, ConAgra has been feeding people for almost a century.
But feeding profit-hungry investors has been a challenge, prompting activist investor Barry Rosenstein, hedge fund manager at Jana Partners, to take a new 7.2% stake in ConAgra stock. And if you thought Jana took the position to remain quiet, think again. On the news, shares of the Omaha, Nebraska-based company spiked more than 7%. It would be a smart move to ride Jana's coatails. But ConAgra has not performed as poorly as Jana claims.
Jana wasted no time making demands, already insisting on a strategic review and capital allocation changes at ConAgra. More specifically, Jana doesn't believe ConAgra is in the right hands, demanding to examine the company's costs, corporate structure and overall operational performance.
Displeased with its results since ConAgra completed its $6.7 billion acquisition of Ralcorp in 2013, Jana has threatened to install three new directors to the company's board. In March, ConAgra took a write down of $1.3 billion related to the Ralcorp deal.
Accordingly, ConAgra then lowered its full-year 2015 earnings per share projections, calling for earnings of between $2.13 and $2.18 a share. Assuming earnings do come at the mid-range of its guidance, or about $2.15 a share, this would translate to a year-over-year decline of 1%, down from $2.17 a share earned a year ago.
It was at that point, Jana said it began building its position in ConAgra stock.
Sure, as of March 31, ConAgra stock -- at $36.29 -- nearly flat with $36.28 close on December 31, 2014. That's a disappointment, yes. That ConAgra stock has traded flat since 2013 would also be a concern. But the shares were up 30% from June 2014, trading at around $28, to the end of March 2015 at levels of above $36. And this was prior to the recent jump to $43, spurred by Jana's stake.
From my vantage point, Jana's involvement seems a year too late. And perhaps, even too early -- depending on how you look at it.
Granted, ConAgra has struggled of late. Revenue has been hard to come by. But that's an issue plaguing the entire packaged food sector, especially large multinational companies like ConAgra, suffering from the strong U.S. dollar where overseas sales are devalued. This is one more reason why expectations have been lowered.
In that vein, ahead of the company's earnings results Thursday, investors would do well owning ConAgra, which has made profitability a top priority. That's where investors' focus should be. Coupled with its cost-cutting initiatives and better marketing, ConAgra projects higher sales and better margins in both its commercial and consumer foods segment in the quarters ahead.
To that end, based on the average analysts' full-year 2016 earnings estimates of $2.28 per share, which puts ConAgra's forward P/E at 19, there is still value in ConAgra stock since earnings are projected to grow by 5% above 2015 levels. And that was even before Jana's involvement. And assuming Jana can spark more growth and improve ConAgra's performance, that's icing on the cake for investors who buy today.
This article is commentary by an independent contributor. At the time of publication, the author held no shares in any of the stocks mentioned.