UPDATE: J.P. Morgan Downgrades ConAgra Foods Following Model Review
In a report published Tuesday, J.P. Morgan analyst Ken Goldman downgraded the rating on ConAgra Foods (NYSE: CAG) from Overweight to Neutral, and lowered the price target from $36.00 to $34.00.
In the report, J.P. Morgan noted, ““Last week, we maintained our Overweight rating following the company's negative pre-announcement. We then maintained it again after uncovering some Nielsen-related data points we interpreted as less than positive. But today we are capitulating, as we are lowering our numbers following a review of our model. We are starting to think consensus estimates contain downside risk: FY14E goes to $2.30 from $2.34 (consensus $2.37) and FY15E to $2.58 from $2.65 (consensus $2.65). And though we continue to see upside to guidance from cost synergies, we now think this is less important than the possibility that CAG's sales disappoint for more than a quarter or two. As mentioned above, we think investors will favor better top lines for a while, an environment that does not necessarily favor ConAgra today. We also note the large amount of uncertainty regarding this company at the moment, including the exact reasons for the 1Q miss, the duration of the challenges, the potential for Ralcorp to recover, the impact of the loss of the potato business, the impact of the divestiture of the milling business, the potential for both top and bottom line synergies from Ralcorp, and the pace of debt paydowns. We establish a December 2014 price target of $33; our previous December 2013 target was $36.”
ConAgra Foods closed on Monday at $31.88.
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