Stock Strategist: ConAgra Splits Its Menu, but We're Not Hungry

[Morningstar Logo] [Company Site] [Company News] [Membership] [Portfolio] [Stocks] [Options] [Funds] [ETFs] [Markets] [Tools] [Personal Finance] [Discuss] Stock Strategist ConAgra Splits Its Menu, but We're Not Hungry While breaking up has proved valuable for peers, we think lagging pricing power and profits will dim ConAgra’s prospects. [tab_bar] by Erin Lash, CFA | 12/9/2016 1:00:00 PM Advertisement Free Issue - Morningstar's Fund Newsletter Get the authoritative source for mutual fund analysis, from the company that invented the field. Morningstar FundInvestor's mission is to hone your consideration set, delivering critical cost analysis, prospects for forward momentum, manager ability, and more. See for yourself why nobody in the investment world knows more about funds than Morningstar. [Download Now!] In less than 18 months at the helm of ConAgra, CEO Sean Connolly has charted a new course. After selling the private-label and spice operations, management has split the consumer foods ([ConAgra Brands] [CAG]) and commercial foods (Lamb Weston [LW]) businesses. Despite the contention that this will allow for more focused execution, we aren’t convinced that this strategic step will enhance the firm’s competitive edge. ConAgra Brands still operates with a portfolio of second- and third-tier brands that have failed to amass much pricing power. Further, profits in the consumer business materially lag peers, and even with plans to extract $300 million in costs (at the low end of the 4%-7% of cost of goods sold and operating expenses that its peers target shedding), we don’t forecast the company will entirely close the margin gap with other branded packaged food firms. As a result, our stance is more tempered than the market’s with regard to ConAgra’s prospects, and we suggest investors remain on the sidelines. Those looking for exposure to the space should consider Pilgrim’s Pride [PPC] instead. To read more, click [here]. Sponsored Links [Buy a Link Now] New: ETF Managed Portfolios Center On [MorningstarAdvisor.com]: Tap into the industry's best source of information on ETF strategies for financial advisors. See key performance data, screen for specific strategy attributes, and learn more about this fast-growing area of the investment marketplace. [Click to get started]. Free Issue | Morningstar's Stock Newsletter >> Morningstar StockInvestor is celebrating more than 10 successful years of high-quality stock investing. Its two real-money portfolios have outperformed the S&P 500 since 2001. [Get new ideas for the core of your stock portfolio]. Search Most Recent Articles [Quality is Cyclical - Just Look at 2016 Returns] [Stress-Testing Funds Through Two Bear Markets and Two Bull Markets] [Joining the Index Is No Way to Beat It] Latest Analyst Reports [Guidewire Software] [VeriSign] [KPN] [Valero Energy] [Brown-Forman] ABOUT OUR EMAIL TO UNSUBSCRIBE this email address to the Stock Strategist newsletter, please click "reply" and then click "send." This will unsubscribe only this email address to this specific newsletter. All subscription changes will take effect within one business day. Replies are not read by individuals, so please do not use this for queries about Morningstar.com. If you have questions about Morningstar.com or your membership, send a note to [joe@morningstar.com]. ABOUT OUR PRIVACY POLICY Please [click here] to learn about Morningstar's privacy policy. (c) Copyright 2016. Morningstar, Inc. 22 West Washington Chicago, Illinois, 60602 All rights reserved.