UPDATE: JP Morgan Upgrades ConAgra Foods to Overweight on Valuation
JP Morgan raised its rating on ConAgra Foods (NYSE: CAG) from Neutral to Buy and reiterated its price target at $29 a share.
JP Morgan commented, "ConAgra is trading at 12.7x NTM P/E versus the large-cap group's 15.0x, and 7.2x NTM EV/EBITDA versus 9.0x. We believe these gaps are too wide for a company that we estimate should grow EBITDA and EPS by a respectable ~4-5% and ~7%, respectively, over the next two years, not including any future acquisitions that may take place. We acknowledge that CAG's fundamentals are below average, but with easy volume comps coming and sales velocities showing signs of life, the company may be heading in the right direction. Lastly, we think our EPS/EBITDA estimates may prove conservative as CEO Gary Rodkin has stated his desire to do more deals (which he can do – after buying $1B in sales over the last year, net debt to EBITDA still sits well below 2x)."
ConAgra Foods closed at $25.11 on Friday.
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