Conagra Brands (NASDAQ: CAG) isn’t leading the consumer staples sector but is a leading candidate for new investment. The company’s struggles have the share prices trading near multi-year lows and offering a deep value to investors. Trading at 12X its earnings outlook, the stock is the cheapest in the consumer staples sector (NYSEARCA: XLY), paying 1 of the highest yields.

The stock is paying about 4.0%, with shares near $33.25, a growing distribution. More to the point, the 2023 distribution increase is expected to be declared at any time and will be a catalyst for the market. 

Conagra Has a Transformational Quarter 

Conagra didn’t have an awe-inspiring quarter, but the results reflect ongoing change within the company. The company is investing in growth and positioning for the future, including growth, albeit slower than before. It is also working to reestablish margin, which is good news for the dividend and the dividend outlook.

Regarding FQ4, the company reported $2.97 billion in net revenue for a gain of 2.1% compared to last year. That’s tepid compared to others in the space, but price elasticity is cutting into the top line. Prices and mix contributed 9.9% to growth while volume declined by 7.7.%. 

The International segment grew fastest at 8.4%, followed by a 5.5% gain in Foodservice. Refrigerated and Frozen declined by 1.1%, but a mitigating factor exists. A supply chain disruption relating to a supplier caused sales to fall short in the quarter. Despite that, the company gained market share in several frozen categories. 

The margin news is mixed but favorable to higher share prices. The company widened the gross margin, but the operating margin narrowed. The mitigating factor is that non-cash charges and increased spending are involved. The non-cash charges are non-recurring, and the increased spending is tied to technology, innovation, and growth investment. The takeaway is that margin contracted less than expected and outpaced the Marketbeat.com consensus despite the top-line weakness. 

The guidance for 2024 is light but could be cautious given the company’s growth investments. The call is for revenue to grow about 1% and for adjusted EPS of $2.70 to $2.75. That’s down from $2.77 in F2023 but $0.03 better than expected. Assuming the company can regain momentum, revenue and earnings may top expectations. 

Analysts See Nothing But Upside For Conagra 

The Q4 results and outlook are unlikely to change the analysts' consensus estimates, which is good news. The analysts rate the stock a Hold which is trending firmer and on the verge of Moderate Buy with a price target of $40. The $40 target is about 20% above the current action, and even the low target of $35 assumes some upside is available. Assuming no change to this outlook, the stock should bottom soon. 

The chart is iffy. The stock price is moving lower within a trading range but nearing support. If support is confirmed, the market should move up within the range. The top of the range is near $38; the bottom is near $32. If the bottom doesn’t hold, this stock could fall to the $30 level or lower, becoming a deeper value with a higher yield.