Why An Activist Could Help ConAgra, But A Breakup Is Still 'Unlikely'

In a report published Friday, Credit Suisse analyst Robert Moskow maintained a Neutral rating on

, while raising the price target from $34 to $42, saying that there could be acceleration in turnaround efforts, but a breakup was unlikely. Activist investor JANA Partners publicly announced that it has a 7.2 percent stake in ConAgra, adding that it plans to work with the management team to improve its business performance and may nominate three representatives to the board. JANA has not called for "a radical breakup" of ConAgra. It has brought together experienced managers who can "speak the language of ConAgra's business" and likely have "a high opinion of incoming CEO Sean Connolly," analyst Robert Moskow said. Moskow expects ConAgra's board to initiate a dialogue and hear out JANA's recommendations, provided they are not "too far-fetched." In the report Credit Suisse noted, "JANA has a good track record for creating value for shareholders by pushing for change at underperforming companies and quite often in a constructive fashion. We are raising our target price on ConAgra to $42 per share to reflect the likelihood that ConAgra will respond to JANA by accelerating its plans to enhance the business' value by reducing costs and unlocking value in the portfolio by selling assets." The EPS estimates for FY16 and FY17 have been raised from $2.05 to $2.26 and from $2.23 to $2.43, respectively. The "enormous debt load" from the acquisition of

restricts the "upside potential from an all-out break up play," Moskow commented.