Why Conagra Stock Got Mashed in March

A recommendation downgrade from an analyst at a prominent bank helped send Conagra (CAG +1.22%) stock down by more than 18% last month. Although this was part of a “package” downgrade of notable food industry stocks, it was small comfort to shareholders.

The sour taste of a downgrade

The downgrading party was one of the “big four” U.S. lenders, Wells Fargo. The bank’s analyst Chris Carey downshifted his rating on Conagra, in addition to two other peer stocks, Campbell Soup and General Mills. He now feels all three rate an underweight (read: sell), where previously he flagged each as an equal weight (hold).

Image source: Getty Images.

According to reports, Carey believes that something like a perfect storm of factors will negatively impact these storied food companies. Consumption trends are sluggish, inflation remains a concern with consumers, and budgets for selling, general, and administrative budgets are rather tight these days.

Specifically addressing Conagra, Carey wrote in his update that the company has rather high leverage, and it’s paying out significantly for its high-yield dividend these days. That pressure on the finances might prove to be too intense.

Later in the month, another analyst, Peter Grom from UBS, weighed in on Conagra. We can’t say he’s a bull, as he reiterated his neutral recommendation and $20 price target on the stock. He sounded an optimistic note about the company’s fiscal third quarter of 2026 (the results of which were published on April 1), according to reports. However, Grom added that current conditions aren’t ideal.

This is due in no small part to the fact that legacy “foodies” are, to varying degrees, struggling to compete in the modern market.

For decades, they did well serving comfort food items to consumers who valued regularity, predictability, and convenience. This dynamic was especially beneficial to Conagra, which specializes in packaged brands such as Birds Eye frozen vegetables, Hebrew National hot dogs and sausages, and Pam cooking oil spray. Yet today’s consumers are more discerning and tend to favor fresher fare.

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NASDAQ: CPB

Campbell’s

Today’s Change

(0.11%) $0.03

Current Price

$22.02

Key Data Points

Market Cap

$6.6B

Day’s Range

$21.77 - $22.20

52wk Range

$20.62 - $40.44

Volume

233K

Avg Vol

8.6M

Gross Margin

28.97%

Dividend Yield

8.86%

The power of a high-yield dividend

The dividend is, for many investors, Conagra’s great draw. Management declared a new quarterly payout of $0.35 per share late in the month, exactly the same amount it has distributed in every quarter since late 2023. While that yields 8.9%, it also results in a sky-high payout ratio (i.e., the ratio of profitability to dividends).

Conagra feels like a shaky stock to me. It seems like a company in need of a refresh to its brand portfolio, including a push into the higher-quality food items currently in vogue. That dividend also looks like it might be in for a cut. I’d avoid this company’s shares for now.