Conagra Stock Could Thrive as Tariffs Hit Other Sectors

Key Points

• Conagra stock managed a small gain despite an earnings miss as investors rotated into consumer staples stocks.
• The company still faces supply chain concerns, which are hurting shipments and a consumer who is opting for private-label brands.
• Despite the headwinds, the company’s high-yield dividend makes CAG stock an attractive investment for investors seeking safety.

On a day when many investors saw nothing but red, Conagra Brands Inc. NYSE: CAG managed a small gain of around 1.5%.

This came despite the company missing on the top and bottom lines in its third quarter 2024 earnings report.

With tariff fears accelerating sector rotation, Conagra may be getting a tailwind from the flight to consumer staples.

CAG stock futures dropped sharply, which investors felt when the market opened.

Investors had to figure out what to make of some disappointing numbers:

• Net sales of $2.8 billion were down 6.3%.
• Operating margin fell to 8.4%, a 712-basis point decrease

That’s not to say the report was a total washout. Revenue of $2.84 billion was slightly below the $2.92 billion expected, and Conagra reported earnings per share (EPS) of 51 cents, which was a penny below estimates. In almost every category, the company told investors the same story. That is, consumption lagged shipments. Volume also remains under pressure due to ongoing supply chain constraints.

It's a continuing story for Conagra as consumers turn to private-label brands to offset the impact of inflation. The company’s forward full-year guidance suggests there’s more downside to come. Management expects a net sales decline of approximately 2% with adjusted EPS of $2.35, down from $2.67 in the prior year.

All of this explains why CAG stock is down about 19% from the 52-week high it made in October 2024. However, in a flight to safety, should investors see the post-earnings increase as the beginning of a broader move higher?

GLP-1 Products May Be Moving the Needle

In late 2024, Conagra announced that starting in January 2025, select Health Choice frozen food lines would display an “On Track” badge indicating that they were GLP-1 friendly. It was the first company to call out GLP-1 friendly on its packaging.

Consumers and investors know about the impact that GLP-1 drugs are making on patients' lives and the earnings of many packaged food companies. This line of products is high in protein, low in calories, and a good source of fiber.

Although Conagra didn’t break out sales from these products specifically, it noted that it continues to hold the majority of volume in the $6.4 billion single-serve meals category, where these products fall. Volume in the just-ended quarter rose 0.6% year-over-year, marking three consecutive quarters of retail volume growth in frozen foods—a category that continues to outperform the broader edible market.

Those volume gains came at a time when the company is still feeling the impact of supply constraints on frozen meals containing chicken and frozen vegetable products.

Investors May Be Overreacting to Tariff Fears

Delivering a disappointing earnings report the day after the Trump administration outlined a sweeping tariff policy could be considered bad timing. However, nothing in the announcement is likely to impact Conagra, which has previously said the previously announced tariffs on steel and aluminum would have minimal impact on the company’s business.

That means that while prices may go up in some areas, they won’t necessarily go up for companies like Conagra. That would be welcome news for investors who have listened to the company’s management talk about consumers continuing to opt for store brands in order to save money.

The report confirmed that the trend remains intact; however, this latest round of tariffs is unlikely to add additional pricing pressure for Conagra.

CAG Stock May Be a Solid High-Yield Hangout

Conagra isn’t going to be the first stock that investors will consider in a bull market.

But consumer staples stocks shine during times of uncertainty. And that’s particularly true of stocks like CAG that come with an attractive dividend that currently yields 5.2%.

Combine that with a forward price-to-earnings (P/E) ratio of around 11x, and investors have the ingredients for a solid place to park their money in the short term.

The stock is currently finding support around its 50-day simple moving average.

Analysts' consensus price target of $28.20 corresponds to the stock’s December 2024 high.