S&P 500 and Nasdaq End Down After Hitting Record Highs

The S&P 500 and Nasdaq reached fresh record highs but quickly fell into negative territory after an auction of 30-year Treasuries showed less demand than some investors expected and pushed yields higher.

Data indicated U.S. consumer prices rose by the most in 13 years last month, while so-called core consumer prices surged 4.5% year over year, the largest rise since November 1991.

Economists viewed the price surge, driven by travel-rated services and used automobiles, as mostly temporary, aligning with Federal Reserve Chair Jerome Powell’s long-standing views.

“Any time you get an uptick in interest rates the stock market is going to get nervous, especially on a day like today,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

The S&P 500 growth index dipped 0.05%, while the value index fell 0.70%.

“With growth outperforming value, the takeaway is clearly that inflation from a market perspective is not a real threat in the long term,” said Keith Buchanan, a portfolio manager at GLOBALT Investments in Atlanta, Georgia.

Ten of the 11 major S&P 500 sector indexes ended lower, with real estate, consumer discretionary and financials each down more than 1%.

JPMorgan Chase & Co stock fell 1.5% after the company reported blockbuster quarterly profit growth but warned that the sunny outlook would not make for blockbuster revenues in the short term due to low interest rates.

Goldman Sachs Group Inc dipped 1.2% after its quarterly earnings exceeded forecasts.

Citigroup, Wells Fargo & Co and Bank of America were due to report their quarterly results early on Wednesday.

PepsiCo Inc gained 2.3% after raising its full-year earnings forecast, betting on accelerating demand as COVID-19 restrictions continue to ease.

June-quarter earnings per share for S&P 500 companies are expected to rise 66%, according to Refinitiv data, with investors questioning how long Wall Street’s rally would last after a 16% rise in the benchmark index so far this year.

All eyes now turn to Fed Chair Jerome Powell’s congressional testimony on Wednesday and Thursday for his comments about rising price pressures and monetary support going forward.

The Dow Jones Industrial Average fell 0.31% to end at 34,888.79 points, while the S&P 500 lost 0.35% to 4,369.21.

The Nasdaq Composite dropped 0.38% to 14,677.65.

Conagra Brands Inc dropped 5.4% after the packaged foods company warned that higher raw material and ingredient costs would take a bigger bite out of its profit this year than previously estimated.

Boeing Co fell 4.2% after the Federal Aviation Administration said late on Monday some undelivered 787 Dreamliners have a new manufacturing quality issue.

Declining issues outnumbered advancing ones on the NYSE by a 2.85-to-1 ratio; on Nasdaq, a 3.06-to-1 ratio favored decliners.

The S&P 500 posted 39 new 52-week highs and no new lows; the Nasdaq Composite recorded 61 new highs and 73 new lows.

Volume on U.S. exchanges was 9.5 billion shares, compared with the 10.5 billion average for the full session over the last 20 trading days.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Cynthia Osterman)

Conagra Brands Tops Earnings, Revenue Estimates in Q3

Chicago, Illinois-based packaged foods company Conagra Brands reported better-than-expected earnings and revenue in the third quarter of the fiscal year 2021, largely driven by continued elevated at-home food consumption due to the COVID-19 pandemic.

The world’s leading food company said its net sales surged more than 8% to $2.77 billion during the three months ended on February 28, 2021. That was above the market expectations of $2.72 billion. Adjusted earnings per share came in at 0.59, beating analysts’ consensus estimates of 0.58 per share.

Net sales for the grocery & snacks segment increased 10.8% to $1.1 billion in the quarter reflecting: a 2.3% decrease from the impact of the Sold Businesses; and a 13.1% increase in organic net sales. On an organic net sales basis, volume increased 9.4% and price/mix increased 3.7%. Volume benefited from continued elevated at-home food consumption as a result of the COVID-19 pandemic.

Conagra Brands forecasts organic adjusted operating margin in the range of 14% to 15% and adjusted EPS between $0.49 to $0.55 in the fourth quarter of the fiscal year 2021. For fiscal 2022, the company expects net sales growth (3-year CAGR ending fiscal 2022) of +1% to +2%, an adjusted operating margin of 18% to 19%, and adjusted EPS of $2.63 to $2.73.

Conagra Brands’ shares, which about 6% in 2020, traded nearly flat at $37.19 on Thursday.

Executive Comments

“We remain confident that each of our retail domains – frozen, snacks, and staples – is well-positioned to sustain the benefits of the eat-at-home habits consumers have developed during the COVID-19 pandemic. Our continued business momentum, coupled with our disciplined approach to investment, reinforce our confidence in the long-term potential of the business and our ability to create sustained value for our shareholders,” said Sean Connolly, president and chief executive officer of Conagra Brands.

“We further demonstrated this confidence by repurchasing nearly $300 million of our common stock this quarter, which came after we raised our quarterly dividend 29% earlier this fiscal year.”

Analyst Comments

Conagra Brands (CAG) Q3 EPS of $0.59, slightly ahead of cons. $0.58, driven by below-the-line items. Org. sales growth beat (+9.7% vs. +7.3%), although gross and op. margins missed, albeit at the low end of mgmt’s Q3 guide. FY’22 guidance reaffirmed with 8.8mm shares repo’d in Q3, which could add $0.05 to FY’22 EPS. Q4 guide above cons. sales, but below on implied op. profit at margin guide midpoint, driven by cost inflation. The question now on margin progression in FY’22,” noted Rob Dickerson, equity analyst at Jefferies.

Conagra Brands Stock Price Forecast

Three analysts who offered stock ratings for Conagra Brands in the last three months forecast the average price in 12 months of $37.00 with a high forecast of $40.00 and a low forecast of $34.00.

The average price target represents a -0.40% decrease from the last price of $37.15. Of those three analysts, one rated “Buy”, one rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $38 with a high of $48 under a bull scenario and $25 under the worst-case scenario. The firm gave an “Equal-weight” rating on the packaged foods company’s stock.

“Advantaged legacy Conagra Brands (CAG) topline growth outlook: Exposure to frozen, an opportunity to turnaround refrigerated business, and snacking growth should sustain LSD org sales growth. PF deal increases operational complexity and reduces fundamental visibility: Greater risk of PF disappointing given higher expectations from management’s strong turnaround track record,” noted Pamela Kaufman, equity analyst at Morgan Stanley.

“We see solid topline growth but limited potential for mid-term target upside: Opportunity to close gross margin gap vs peers, but see downside risk if topline/synergy estimates fall short of optimistic F22 targets. The valuation reflects higher leverage: 10.5x 2022 EV/EBITDA valuation reflects relatively higher leverage of 3.6x net debt/EBITDA.”

Several other analysts have also updated their stock outlook. Conagra Brands had its price target boosted by Credit Suisse Group to $34 from $33. They currently have an underperform rating on the stock. Zacks Investment Research upgraded Conagra Brands to a hold rating from a sell rating and set a $36 price objective. Jefferies Financial Group issued a buy rating and a $41 price objective for the company.

Check out FX Empire’s earnings calendar

Conagra Brands Hits Two-Month High After Upbeat Outlook

Conagra Brands, Inc. (CAG) jumped over 4% Tuesday after the packaged food giant surpassed Wall Street expectations and issued an upbeat forecast. The Chicago-based firm posted fourth-quarter fiscal 2020 earnings of 75 cents per share, easily eclipsing analysts’ expectation of 51 cents a share. The figure also grew 108% from the profit reported in the year-ago quarter. Meanwhile, revenue came in at $3.13 billion, well ahead of $2.39 billion reported in the March quarter last year.

Behind The Numbers

Management credited increased at-home food consumption resulting from the coronavirus pandemic and favorable pricing as major drivers for the better-than-expected quarterly result. Furthermore, the firm anticipates improving demand across its retail business in the first quarter of fiscal 2021 and reaffirmed its full-year earnings guidance range of between $2.66 and $2.76, outpacing analysts’ consensus forecast of $2.50 per share.

Analyst View

Last month, Jeffries analyst Rob Dickerson upgraded the company’s stock to ‘Buy’ from ‘Hold’ and lifted his price target by $10 to $41 a share – representing a 17% premium to Tuesday’s $35.17 close. Dickerson says more people eating at home over the next few years bode well for the packaged food giant.

“A reduction in CAG’s brand portfolio risk via higher at-home food consumption increases FY’22 target achievability, in our view, given further top-line tailwinds,” the analyst said. Dickerson also argues that the stock’s 15% relative P/E valuation discount relative to its U.S. food industry rivals is unjustified. As of July 1, 2020, the company trades at 15 times forward earnings, around 20% below its 5-year average multiple of 18 times.

More broadly, Wall Street analysts have a mostly bullish outlook for the stock, with 6 ‘Buy’ ratings, 9 ‘Hold’ Ratings, and 1 ‘Strong Buy’ rating. Interestingly, no analysts recommend selling the stock, indicating possible further upside in the months ahead.

Technical Outlook

Conagra now trades more than 35% above its pandemic-selloff low, placing it into bull market territory. Buyers piled into the stock after yesterday’s upbeat earnings report, driving the price to a two-month high on above-average volume. Furthermore, the MACD indicator crossed back above its trigger line to generate a buy signal. The breakout may result in a retest of the multiyear high around $42. Alternatively, if the breakout fails, look for a decline to $31, where price finds a confluence of support from the April and September 2019 swing highs, and rising 200-day simple moving average.

CAG Chart

Conagra Brands Forecast 13% jump in Q1 Organic Sales; Shares Jump 6%

Conagra Brands Inc, an American packaged foods company headquartered in Chicago, said that it predicts more than 10% rise in organic net sales this quarter after the company beat Q4 revenue projections on solid demand for frozen foods and snacks amid coronavirus-led lockdowns, sending shares of the processed and packaged foods maker up 6%.

The company’s fourth-quarter net sales increased 25.8%; organic net sales increased by 21.5%, with double-digit growth in each of the Company’s three retail segments. Fiscal 2020 net sales increased by 15.9%, and organic net sales increased 5.6%, the company said.

Diluted earnings per share from continuing operations (EPS) for the fourth quarter grew 57.7% to $0.41, and adjusted EPS more than doubled to $0.75. EPS for fiscal 2020 grew 12.4% to $1.72, and adjusted EPS grew 13.4% to $2.28. The Company projected first-quarter fiscal 2021 of organic net sales growth in the range of 10% to 13%, adjusted operating margin in the range of 17.0% to 17.5%, and adjusted EPS in the range of $0.54 to $0.59.

Following this announcement, Conagra Brands shares climbed 6% premarket after earnings beat past estimates.

Although several U.S. states have started to ease lockdowns, the demand for packaged foods remains high in the current quarter, since consumers prefer to cook by themselves rather than venturing out as fears of coronavirus remain high.

Sean Connolly, president and chief executive officer of Conagra Brands, said in a press release, “Our business clearly benefited from increased at-home eating in the fourth quarter, as the elevated retail demand outweighed the reduced foodservice demand. In retail, many consumers tried our modernized products for the first time and then returned for more.”

“While we are optimistic about the long-term implications of recent consumer behaviour shifts, given COVID-19 uncertainties, we are only providing guidance for the first quarter of fiscal 2021. We intend to provide an update on our fiscal 2021 outlook next quarter,” he added.

Conagra Brands outlook and price target

Ten analysts forecast the average price in 12 months at $36.00 with a high of $41.00 and a low of $32.00. The average price target represents a 6.82% increase from the last price of $33.70, according to Tipranks. From that ten, four analysts rated ‘Buy’, six rated ‘Hold’ and none rated ‘Sell’.

Morgan Stanley target price is $32 with a high of $44 under a bull scenario and $22 under the worst-case scenario. JP Morgan raised price target to $39 from $34 and Deutsche Bank raised the target price to $32 from $31. On the technical chat, 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst comment

“Exposure to frozen, opportunity to turnaround the refrigerated business, and snacking growth should sustain LSD org sales growth,” wrote Pamela Kaufman, equity analyst at Morgan Stanley in his last month’s note.

“We see solid HSD EPS growth but limited potential for mid-term target upside: Opportunity to close gross margin gap vs peers but see downside risk if topline/synergy estimates fall short of optimistic F22 targets,” she added.