It looks like reality is giving conventional wisdom another punch to the gut. Although food stocks are supposed to be good places to hide out during tough economic times, some of the major food shares have not done all that well over the past year relative to the broader market. Given how ConAgra's (NYSE:CAG) business performed over the past quarter, it is not hard to figure out why the stock has lagged.
The Quarter That Was
All in all, it is hard to say that ConAgra's performance in its fiscal first quarter was much better than lousy. Sales dropped more than 2% for the quarter, led by a 3.2% decline in commercial food sales. Although management did seem to say that the company had gained some market share during the quarter, the relatively better performance of General Mills (NYSE:GIS) puts that into at least some doubt. Then again, Del Monte Foods (NYSE:DLM) showed some volume weakness as well, so investors probably ought to be cautious about making "apples to not-exactly-apples" comparisons between the major food companies.
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2 comments:
Y, all food companies are not created equal. ConAgra and Kraft seem to be perpetual laggards while Nestle and General Mills seem to find ways to grow. ConAgra has made numerous changes over the years, selling off commodity businesses like packaged meats and acquiring numerous brands like Chef Boy R Dee and Orville Redenbacher. In spite of this, they have not yet found the formula for steady growth and for those desiring an income stock, be advised CAG cut its dividend by 30% in 2007. Until they can start showing steady growth of free cash flow, future restructurings may put dividends at risk again.
Yeah, I would basically agree.
I'm not sure how much risk there is to the dividend at this point, but this is clearly an also-ran company with a collection of also-ran brands.
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