How Will ConAgra Foods (CAG) Stock Be Affected By This Court Liability Ruling?

NEW YORK (TheStreet) -- ConAgra Foods (CAG)  was absolved of liability for a 2010 flour mill fire and explosion that resulted in three injuries, according to a federal appeals court ruling.

The ruling overturned much of the $180 million judgement that was levied against the packaged food company, according to Reuters.

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In 2012, an Illinois federal jury ruled that the company was responsible for $100 million in punitive damages as well as $77 million in compensatory damages that were to be paid by ConAgra and West Side Salvage, the company ConAgra contracted to save the contents of a wheat pellet silo at a facility.

The three judge panel dismissed the punitive damages judgement while upholding the punitive damage charges against West Side Salvage.

ConAgra shares closed trading flat at $32.46 today.

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 multiple 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 3.1%. 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.
  • In its most recent trading session, CAG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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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