Conagra Insiders Buy as Wells Fargo Cuts to $13 Target

NEW YORK, May 20 —

On April 14, two Conagra Brands board members made open-market share purchases on the same day, spending a combined $608,902 at prices they are now underwater on. Wells Fargo, carrying a Sell rating, cut its price target to $13.00, a figure now below the current $13.93 close. Board members and a major sell-side firm are pointing in opposite directions with real money at stake. One of them is wrong. The next earnings report will determine which.

The Board Votes With Its Wallet

Richard H. Lenny and John J. Mulligan did not buy on different days, in staggered sizes, through any programmatic plan. They both purchased on April 14, in material amounts, at $14.34 and $14.31 per share respectively. Lenny's 25,000-share purchase cost $358,500. Mulligan's 17,500 shares ran to $250,402. The 90-day window shows no insider sales to offset either position.

Open-market purchases mean exactly what they say: a director reached into personal funds and bought stock at prevailing prices. That carries more informational weight than restricted stock vesting or a 10b5-1 plan set up months earlier. The complicating factor is timing. Both directors paid above the current $13.93 close and are sitting on paper losses as of May 20. The purchases either reflect a view that the stock trades below intrinsic value, or a judgment that will take time to vindicate. Either way, the bet is placed.

Two Downgrades and a Miss

The bearish case rests on numbers that are hard to argue with. Trailing-twelve-month revenue of $11.18 billion is down 1.9% year-over-year. Gross margin of 24.3% is thin for a packaged-food company absorbing input costs as consumers shift toward private-label alternatives. Wells Fargo maintained its Sell and cut its price target to $13.00; Zacks Research also recently lowered its rating on the company. Two independent sell-side moves in the same direction within weeks is a pattern, not noise.

The earnings history adds context. The April 1 earnings release showed EPS of $0.56 against a $0.58 estimate, a miss that followed two consecutive beats: $0.39 against a $0.33 estimate, then $0.45 against a $0.44 estimate. A beat-beat-miss sequence as volumes decline is not a crisis. But it is the wrong direction at the wrong time, and it gave the sell side a data point to anchor the downgrades around.

The Case for Cheap

At 8.2x forward earnings and $655 million in trailing free cash flow, the numbers make a case that Conagra is cheap. Against a $6.66 billion market cap, that free cash flow implies a yield approaching 10% — the kind of number that makes absolute-value investors look twice even when the top line is contracting. A business at this multiple is being priced as though something is structurally broken. The board's open-market buying is a bet that the stock's selloff went further than the fundamentals justify.

That framing matters. Buying at $14.34 and $14.31 after a consensus miss implies conviction that the stock's reaction was excessive, not that the business is accelerating. This is a mean-reversion argument at a compressed multiple. It is not a growth thesis.

What to Watch

The next quarterly report is the cleanest test. A return to the beat pattern of the two prior quarters validates the board's thesis and makes Wells Fargo's $13.00 target look isolated. A second consecutive miss — particularly if gross margin compresses below 24.3% or revenue decline accelerates past -1.9% — shifts the burden to the bears. That outcome would rehabilitate the Sell rating as prescient rather than early.

Free cash flow is the metric to track. At $655 million trailing, it is the primary argument that $13.93 is cheap at 8.2x. If volume declines pull that figure lower, the valuation floor argument erodes with it. The board has posted $608,902 in open-market conviction. The next earnings release grades the decision.

Run the free Conagra Brands, Inc. deep-dive →

Basis Report does not hold positions in securities discussed. This is not investment advice.