Earnings Previews: Conagra, Constellation Brands, Schnitzer Steel, Walgreens

At Tuesday’s opening bell, stocks were trading a bit higher. In the first quarter hour of trading, the Nasdaq traded up by around 0.9%, the S&P 500 up by about 0.4% and the Dow Jones industrials were essentially flat. An hour later, all three indexes were trading lower.

There have been no earnings reports of note since before Christmas. This week, there are four, all reporting before U.S. markets open on Thursday.

Conagra Brands

Over the past 12 months, the share price of packaged food giant Conagra Brands Inc. (NYSE: CAG) has increased by about 14.2%. For the past three months, the stock is up 18.6%.

Last week, the company settled a class action lawsuit filed more than a decade ago related to false advertising of its Wesson brand vegetable oil. Conagra sold Wesson to Canada’s Richardson International in February 2019 for an undisclosed sum.

During its fiscal second quarter, Conagra is expected to have been able to raise prices without losing customers. The high payout ratio and generous dividend have remained.

Of 17 analysts following the stock, nine have a Hold rating while another seven rate the shares at Buy or Strong Buy. At a recent price of around $38.70, the shares have outrun their median price target of $38.00. At the high price target of $45.00, the upside potential is 16.3%.

The consensus estimate for fiscal 2023 second-quarter revenue is $3.27 billion, which would be up about 12.7% sequentially and by about 6.9% year over year. Adjusted earnings per share (EPS) are expected to come in at $0.66, up 16.5% sequentially and by 3.1% year over year. The current estimates for the 2023 fiscal year that ends in May call for EPS of $2.47, up 6.5%, on sales of $12.23 billion, up just over 6%.

Conagra stock trades at 15.7 times expected 2023 EPS, 14.7 times estimated 2024 earnings of $2.63 and 13.9 times estimated 2025 earnings of $2.78 per share. Conagra’s 52-week trading range is $30.06 to $339.22, and the high was posted last week. The company pays an annual dividend of $1.32 (yield of 3.4%). Total shareholder return over the past 12 months is nearly 18.5%.

Constellation Brands

Constellation Brands Inc. (NYSE: STZ) produces, imports and sells beer, wine and spirits in the United States and other countries. With a market cap of around $42.8 billion, it is the country’s largest publicly traded alcoholic beverage stock.

The shares have dropped about 7.1% of their value over the past 12 months, including a drop of nearly 10% in just the past month. On the plus side, net debt is low, and free cash flow is high. Also on the plus side, analysts have set a pretty low bar for third-quarter revenue and EPS.

Of 28 analysts covering the company, 22 have a Buy or Strong Buy rating and the other six have Hold ratings. At a share price of around $231.75, the upside potential based on a median price target of $276.50 is 19.3%. At the high price target of $310.00, the upside potential rises to 33.8%.

Analysts expect Constellation to report fiscal 2023 third-quarter revenue of $2.31 billion, down 10.2% sequentially but up 2.6% year over year. Adjusted EPS are pegged at $2.90, down 8.5% sequentially and 7.1% lower year over year. For the full fiscal year ending in February, estimates call for EPS of $11.06, up by 8.4%, and revenue of $9.5 billion, up 7.7%. More than half of 2023’s estimated revenue was posted in the first two quarters of the fiscal year.

Constellation stock trades at 21 times expected 2023 EPS, 18.4 times estimated 2024 earnings of $12.62 and 16.2 times estimated 2025 earnings of $14.35 per share. The stock’s 52-week range is $207.59 to $261.52. Constellation pays an annual dividend of $3.20 (yield of 1.38%). Total shareholder return for the past 12 months is negative 5.8%.