The investors in Conagra Brands, Inc.'s (NYSE:CAG) will be rubbing their hands together with glee today, after the share price leapt 24% to US$35.07 in the week following its quarterly results. Revenues of US$2.8b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$0.53, missing estimates by 5.9%. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Following last week's earnings report, Conagra Brands's 13 analysts are forecasting 2020 revenues to be US$10.7b, approximately in line with the last 12 months. Statutory earnings per share are expected to soar 22% to US$2.02. Before this earnings report, analysts had been forecasting revenues of US$10.7b and earnings per share (EPS) of US$1.99 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
With analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 10% to US$34.79. It looks as though analysts previously had some doubts over whether the business would live up to their expectations. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Conagra Brands analyst has a price target of US$40.00 per share, while the most pessimistic values it at US$28.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Conagra Brands shareholders.
In addition, we can look to Conagra Brands's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. From these estimates it looks as though analysts expect the years of declining sales to come to an end, given the flat revenue forecast for next year. That would be a definite improvement, given that the past five years have seen sales shrink five years annually. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 2.8% per year. So it's pretty clear that, although revenues are improving, Conagra Brands is still expected to grow slower than the market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Conagra Brands. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Conagra Brands going out to 2022, and you can see them free on our platform here..
It might also be worth considering whether Conagra Brands's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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