ConAgra knows food demand is continual, not cyclical

Posted Mar 3rd 2008 5:16PM by Joseph Lazzaro
Filed under: ConAgra Foods (CAG), Stocks to Buy

With the markets in a choppy/consolidation mode (or perhaps worse), it's best to consider including a few defensive stocks in your portfolio. And with the above in mind ConAgra is worth an evaluation.

ConAgra (NYSE: CAG) is one of the largest food companies in North America.

Analysts see moderate revenue growth for ConAgra in F2008, with large profits from its trading and merchandising businesses. CAG's food / ingredients unit should also register a solid increase in earnings.

Meanwhile, CAG's consumer foods line should perform adequately in F2008: analysts had originally expected the unit to record lower profits, but there are abundant signs that that will not be the case. The Reuters F2008/F2009 EPS consensus estimates for CAG are $1.59/$1.63.

In addition, analysts remain impressed by ConAgra's cost controls amid an even tougher business environment. Further, analysts like the fact that CAG has sold-off its agricultural segments and a number of non-core brands in order to produce only branded and value-added packaged foods.

The risks? Analysts are keeping an eye on CAG's commodity costs and on increasing competition from generic-frozen food producers.

The First Call mean rating for CAG is: Hold. [9 firms.] Mean 2008 target: $28. [high: $33, low: $24.]

Stock Analysis: ConAgra is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from shares. Sell / Stop Loss if you were to purchase shares in this company: $13.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: CAG, ConAgra, food, frozen foods, ingredients, inthenews