Conagra Brands Inc.: It’s Not A Re-Base But a Re-Brase, as New CEO Brings About Significant Strategic Changes

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Conagra Brands Inc.: It’s Not A Re-Base But a Re-Brase, as New CEO Brings About Significant Strategic Changes

9 0.33 0.34

• Updating Estimates. FY27 goes to $1.48 from $1.57 and FY28 goes to $1.52 Q2 0.45 0.41 0.41

from $1.63. We establish a December 2027 price target of $15, which is based Q3 0.39 0.35 0.36

Q4 0.47 0.39 0.41

on 10x 2028 P/E and 8x 2028 EV/ EBITDA (these are slightly below peers). FY 1.72 1.48 1.52

Our prior December 2026 price target was $14.

Style Exposure

• CAG’s strategic changes largely fill up the bingo card of past investor

critiques. Over the years, we have heard from investors that CAG (1) does not

spend enough on marketing, (2) relies too much on promotions, (3) has too

many products, (4) has too many brands, (5) has not invested enough in its

supply chain, (6) has focused too much on volume at the expense of margin,

(7) pays too big of a dividend to properly reduce leverage, and (8) has hoped

that protein deflation will finally take hold, rather than forcing action. New

CEO John Brase seems to have addressed all of these items. The company

outlined plans to raise prices (especially on the frozen portfolio), boost cap ex

to address the supply chain, and cut its dividend. His comments about

reviewing the portfolio suggest to us that CAG could reduce its SKU count

(nearer term) and perhaps look to divest certain non-core assets (longer term).

• The dividend cut provides CAG the ability to reinvest and reduce debt.

CAG’s annual dividend was reduced by 50% to $0.70 annually. At the midpoint

of guidance this works out to a payout ratio below 50%, though the company

targets 50-55% over time and plans to increase it if/when earnings recover. The

lower starting point this year gives CAG a bit more flexibility this year to