Before Buying ConAgra, Read the Label

NEW YORK ( TheStreet) -- Packaged-food giant ConAgra ( CAG) will report fiscal first-quarter results on Thursday before markets open.

Investors want to know if now's the best time to check out ConAgra. Perhaps. But I suggest we first read the label.

While ConAgra, which recently acquired Ralcorp, continues to take decent strides to synergize both businesses, management has been unable to address eroding margins and poor organic growth. ConAgra recently lowered its fiscal 2014 earnings-per-share guidance by 2.5%. I don't believe we can continue to pretend that meaningful operational improvements are imminent.

To that end, even though the stock has been down by as much as 17% over the past month, I'm just not yet ready to apply ConAgra to my value diet. On Thursday, I don't believe there is anything management will say to alter the near-term view of the company. From a market reaction point of view, there likely won't be any negative surprises either.

The company has already "pre-announced" the important details of the quarter, including what amounts to a four-year plan. Last week the company lowered its full-year earnings-per-share expectations from a high of $2.40 to a range of $2.34 and $2.38 per share. While this does suggest as much as a 10% year-over-year improvement, very little of that growth is organic.

I've raised this point recently while discussing Campbell Soup Company ( CPB), which, like ConAgra, has struggled with "real growth" for quite some time. Bulls have long argued how this metric is exaggerated. But I disagree, especially given the nature of this sector and how quickly consolidations occur.

Organic growth, which measures a company's operational performance using only internal resources and excluding events like acquisitions, continues to be one of the best identifiable metrics (or "labels," if you will) when buying these stocks. Plus, it's anyone's guess when weak shipping volumes, which have also plagued (among others) Coca-Cola ( KO), are going to rebound.

Unlike PepsiCo ( PEP), which has navigated the weak volume environment with partnerships like Yum! Brands ( YUM) and the Doritos Locos Tacos of Taco Bell, ConAgra doesn't have that type of a card to play to offset what remains as challenging conditions. Management talked about steps that it's taking to improve sales performances. That's all well and good. But it assumes customers have suddenly been turned off by the company's many household brands including Swiss Miss, PAM and Healthy Choice.

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