CAG Q3 - Steady as She Goes

ConAgra is scheduled to report Q3 2013 EPS this Wednesday, April 3rd before the market opens.  Consensus for the quarter is $0.56 per share, and for the full year $2.15 (one quarter remaining after Wednesday’s report).  The quarter closed the week following CAG’s presentation at CAGNY (February 19th) where the company raised full-year guidance to “approximately $2.15”, so we expect few surprises.  We are at $0.57 for the quarter.



While we don’t expect this week’s earnings release to be a positive catalyst for the name, we do think that we can hear some commentary that may support the investment thesis, specifically, early commentary regarding merger integration and any commentary on the input cost environment.

 

Finally, to the extent that value exists anywhere in consumer staples these days, CAG at 14.8x ’13 EPS (calendar) makes sense to us given the opportunity we see for outsized EPS growth over the next 2-3 years due to the combination of merger synergies, deleveraging and a more benign commodity cost environment that could stand to substantially benefit both the branded business at CAG as well as the legacy and recently acquired private label business.

 

CAG is one of our preferred names in the staples universe and we are going to stick with it.

 

Call with questions,

 

Rob

Robert  Campagnino

Managing Director

HEDGEYE RISK MANAGEMENT, LLC

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Matt Hedrick

Senior Analyst