BofA cuts ConAgra Brands, says ’protein-flation to take bite out of FY26 earnings’

June 13, 2025 02:27 AM AEST | By Investing

Google News:

BofA cuts ConAgra Brands, says ’protein-flation to take bite out of FY26 earnings’ — Image source: Kalkine Media

Recent News

Hershey Releases 2024 Responsible Business Report

AMD Advancing AI event: Here’s how Wall Street analysts reacted

PotlatchDeltic’s Carbon Storage

Charles Schwab stock falls after monthly report shows drop in new acco...

Investing.com -- Bank of America (NYSE:BAC) lowered its rating for ConAgra Brands to Underperform from Neutral in a note Thursday, lowering its price target for the stock to $20 from $27 a share.

The bank warned that rising protein costs will pressure margins and earnings over the next year.

BofA’s new price target suggests an approximately 10% downside risk from current levels.

BofA said its new price target “reflects 1) lower FY26-FY27 EPSe that are ~15% below consensus and 2) a CY26 P/E valuation multiple of 10x.”

The downgrade follows concerns about ConAgra’s cost structure and limited pricing flexibility.

“CAG faces unique challenges within packaged food heading into its FY26 based on 1) the company’s inflation basket within COGS (protein) and 2) the limited additional pricing power we see in CAG’s largest category (single-serve frozen meals),” the analysts said.

The bank’s updated cost-of-goods-sold (COGS) analysis suggests that “protein inflation (chicken, beef, pork) [is] set to be a meaningful headwind to earnings growth.”

While the company managed to offset 4% inflation with 4% productivity gains in FY25, BofA expects COGS inflation to rise to 6% or more, resulting in around 100-150bps of YoY gross margin pressure.

BofA also flagged demand elasticity for frozen meals, noting that “historical -1 elasticity” limits pricing power.

Following the sale of Chef Boyardee, BofA raised concerns about leverage and dividend coverage.

“CAG completed the sale of Chef Boyardee on June 3. While we view this as a positive for CAG longer term (Chef growth dilutive), its relative attractiveness from a margin/cash flow perspective are tough to forgo,” said the bank.

This article first appeared in Investing.com

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (“Kalkine Media, we or us”), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary.
The content published on Kalkine Media also includes feeds sourced from third-party providers. Kalkine does not assert any ownership rights over the content provided by these third-party sources. The inclusion of such feeds on the Website is for informational purposes only. Kalkine does not guarantee the accuracy, completeness, or reliability of the content obtained from third-party feeds. Furthermore, Kalkine Media shall not be held liable for any errors, omissions, or inaccuracies in the content obtained from third-party feeds, nor for any damages or losses arising from the use of such content.
Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyrighted to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have made reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.
This disclaimer is subject to change without notice. Users are advised to review this disclaimer periodically for any updates or modifications.