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ConAgra Acquisition Spree Continues

Zacks Equity Research

ConAgra Foods Inc. (CAG) has been assiduously expanding its store-brand food business portfolio over time despite facing ongoing difficult macro-economic situations. Acquisition of a number of private labels paved the way for such expansion; the latest on its list being Kangaroo Brands, a well-known manufacturer of pita bread and frozen sandwiches.

Post acquisition, the manufacturing unit of Kangaroo’s pita chip business based in Milwaukee, WI. will be integrated with ConAgra’s food business. However, the financial terms and conditions of the agreement were not disclosed.

The recent acquisition supports the company’s strategy of low-priced product innovation and value-added services. It will add depth and dynamism to ConAgra’s existing product lines.

The previous acquisitions by ConAgra such as, National Pretzel Co., Del Monte Canada and Odom's Tennessee Pride are expected to have a positive impact on the company’s growth prospects. Earlier, in the third quarter of fiscal 2012, the company witnessed about 7.4% augmentation in net sales from the prior-year quarter.

ConAgra Foods Inc. established itself as one of North America’s leading food makers operating in Consumer Foods and Commercial Foods segments. The Company’s brand acquisition strategy, sales execution, marketing and innovation capabilities have over time given a tough competition to its peers like Kraft Foods Inc. (MDLZ), Nestl (NSRGY) and H. J. Heinz Company (HNZ).

The current Zacks Consensus EPS Estimate for the fiscal year 2012 and 2013 are $0.50 and $1.77, signifying annual growth of 5.61% and 8.50%, respectively. The company currently carries a Zacks #3 Rank which denotes a short-term (1-3 months) ‘Hold’ recommendation for the stock. We currently maintain a Neutral recommendation on the stock.

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