Pinnacle Foods (PF) Stock Gains After Jana Partners Takes Stake in ConAgra

NEW YORK (TheStreet) -- Shares of Pinnacle Foods (PF) were gaining 6.3% to $45.83 on heavy trading volume on Friday after activist investor Jana Partners disclosed its stake in competitor food company ConAgra Foods (CAG).

Jana Partners announced on Thursday that it now holds about a 7.2% stake in ConAgra. The activist investor said ConAgra's acquisition of Ralcorp in 2013 "has been followed by disappointing performance for stockholders, repeated guidance misses, negative revisions to long-term earnings targets, no dividend per share growth, and operating performance challenges."

The hedge fund said it wants ConAgra to review its strategy and corporate structures, examine its operational performance and costs, and better manage how it allocates capital, according to Bloomberg.

Shares of ConAgra were gaining 8.8% to $42.57.

Jana Partners interest in ConAgra and the subsequent gains in the company's stock helped bring up shares of other food companies such as Pinnacle Foods.

About 2.4 million shares of Pinnacle Foods were traded by 11:38 a.m. today, above the company's average trading volume of about 747,000 shares a day.

TheStreet Ratings team rates PINNACLE FOODS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate PINNACLE FOODS INC (PF) 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. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, increase in net income and notable return on equity. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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

  • The revenue growth came in higher than the industry average of 11.1%. Since the same quarter one year prior, revenues slightly increased by 3.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Compared to its closing price of one year ago, PF's share price has jumped by 31.65%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Food Products industry average. The net income increased by 1.9% when compared to the same quarter one year prior, going from $40.75 million to $41.54 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Food Products industry and the overall market on the basis of return on equity, PINNACLE FOODS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • PINNACLE FOODS INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PINNACLE FOODS INC increased its bottom line by earning $2.12 versus $0.77 in the prior year. For the next year, the market is expecting a contraction of 10.6% in earnings ($1.90 versus $2.12).
  • You can view the full analysis from the report here: PF Ratings Report

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