Conagra Insiders Selling Abruptly Halts In Q3 2021
The insider and institutional activity in Conagra Brands (NYSE: CAG) have been mixed to be sure but the balance of activity is bullish. In regards to insiders, insiders were selling earlier in the year when shares prices were nearing long-term and all-time highs but that activity ceased at the end of Q3 and there has been virtually no activity in the time since. Balancing that out is the institutional activity which is net-bullish for the past 4 quarters. Insider activity is worth a net $787.00 million or about 4.8% of the company. That’s not a mind-blowing amount but when the Institutions already owned 80% of the company it is a significant figure indeed. Conagra may face some headwinds but its growth story, value, and high-yielding dividend are compelling forces.
Conagra Struggles With Inflation
Conagra is struggling with inflationary pressures but, for now, appears to be mitigating those factors despite an unexpected acceleration of the same. The company reported mixed results for the quarter and gave equally mixed guidance with one important takeaway; both revenue and earnings are growing on a two-year basis despite the bite of inflation and the outlook for the 2nd half of the year is favorable. Assuming the company can continue to execute on its inflation-mitigating plans we see the potential for better-than-guided results as well.
As for the Q2 results, the revenue of $3.1 billion is up 2.1% versus last year and beat the consensus by 265 basis points. The revenue was driven by strong demand in all categories and that strength is expected to continue into the back half of the fiscal year. The bad news is that inflation cut into the bottom line by 500 basis points those pressures, too, are expected to continue into the back half of the year. On the bottom line, the GAAP $0.57 is down YOY and missed by a dime while the adjusted $0.64 missed by $0.04. Both adjusted and GAAP EPS is, however, up on a two-year basis.
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"Looking ahead, we expect to continue experiencing cost pressures above original expectations in the second half of fiscal 2022. However, we believe the sustained elevated consumer demand coupled with the mitigating actions we have successfully executed, and will continue executing, put us on track to overcome these near-term challenges, improve margins in the back half of the fiscal year, and deliver on our profit plan,” says CEO Sean Connolly.
Mixed Guidance Weighs On Conagra
Conagra gave favorable guidance but guidance that includes the increasing impacts of inflation. The company raised its forecast for revenue to up 3% organic versus the prior up 1% and Marketbeat.com consensus of up 0.5% but left the EPS outlook unchanged. This is because inflation is expected to run near 14% versus the 11% previously forecast but there is good news. The revenue strength is enough to offset the acceleration of inflation and deliver EPS of $2.50 versus the previous $2.50 and the consensus of $2.46.
Price action in Conagra pulled back in early premarket action following the Q2 release and guidance update and it may fall further after the open. The first target for strong resistance is at the short-term moving average where we would expect to see price bounce if not reverse. Shares of Conagra are falling in the very near term but have just completed a reversal pattern that should keep the stock moving sideways if not edging higher. While the near-term outlook is cloudy, the longer-term outlook includes margin expansion once/if some of the underlying inflationary pressures (commodity and freight cost, etc) begin to subside.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Conagra Brands (CAG) | $31.63 | +1.2% | 4.43% | 15.89 | Hold | $33.14 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
