CAG ConAgra Brands Inc

For Immediate Release

Chicago, IL – January 27, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Tyson Foods Inc. (TSN), Sara Lee Corp. (SLE), ConAgra Foods Inc. (CAG), Walmart Stores Inc. (WMT) and Chevron Corporation (CVX).

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Here are highlights from Thursday’s Analyst Blog:

‘Let’s Move’ Spurs Mixed Reactions

First Lady Michele Obama’s keep fit campaign ‘Let's Move,’ which has been launched nearly two years back for protecting children against obesity, is causing worry for some food giants. The campaign suggests the inclusion of more vegetables and fruits and less of meat and fats in US school meals. The processed meat producers are among the worried lot, as this definitely means lesser consumption of their products.

Obesity among children has spread like an epidemic. Nearly 57% of New Yorkers are overweight or obese, and about 10% of the obese children have been told they have Type 2 diabetes. The health officials report that many obese children are under treatment in the city hospitals and need knee replacements, among other things.

The ‘Let's Move’ campaign has changed the way the Americans eat. Mrs. Obama has addressed governors, mayors, school groups, food makers and other constituencies, urging them to promote a healthy and obesity free lifestyle for the future of America.

She visited schools across the country to encourage students to plant vegetables and fruits in their own school gardens and also open salad bars in their lunchtimes. She has been working hard at exercise clinics with kids, including those on the White House South Lawn.

Her first major victory since the launch of the movement came when U.S. Department of Agriculture (USDA) passed a rule which calls for a major overhaul of the menus in school kids’ lunchboxes. It set a platter of new federal standards for the lunch program, which feeds roughly 31 million children each school day.

The updated school lunch standards are expected to spell the end of "mystery meat" served in the schools, and instead fill plates with offerings such as whole wheat pasta, fresh cantaloupe, grilled chicken and chef salads.

Moreover, Friday's menu, cheese pizza with tater tots and canned fruit will be replaced by whole wheat crust, baked sweet potato fries. Pineapple in sugary fruit syrup would be replaced by grape tomatoes, which will be served with low-fat ranch dip.

The new endeavors by the government to reduce obesity have, however, caused food giants to worry. Processed meat producers like Tyson Foods Inc. (TSN) and Sara Lee Corp. (SLE) are not happy with the new regulation.

The National Cattlemen’s Beef Association feels that meat is an important part of diet as it provides protein, they also point that the variety of beef options available allows schools to incorporate lean beef into their menu plans on any budget.

The government, however, feels that dropping meat at breakfast won’t impair nutrition because children get plenty of protein from whole grains, and breakfast meats are often processed and fatty.

However, the campaign has been a blessing for some food giants in America. For example, this development marked a victory for ConAgra Foods Inc. (CAG), maker of Hunt’s tomato products and Schwan Food Co., which holds 70% of the market for pizza in the $9.5 billion school food-service industry.

The campaigns seem to be forcing the retailers reconsider things, as most recently Walmart Stores Inc. (WMT), the country's largest retailer, promised to cut the levels of salt, fat and sugar in their products. It also pledged to bring down the prices of fresh fruit and vegetables so that they are easily available to people who strive for healthy eating habits. ConAgra Foods lobbied to block its limits on potatoes and tomato paste in pizza.

Currently we hold a Zacks #3 Rank for Tyson, Sara Lee and Walmart, implying a short term hold rating. For ConAgra we hold a Zacks #2 Rank, implying a short-term Buy rating.

Earnings Preview: Chevron

U.S. energy behemoth Chevron Corporation (CVX) is scheduled to report its fourth quarter 2011 results on Friday January 27, 2012 before the start of trading.

The Zacks Consensus Estimate for the to-be-reported quarter is a profit of $2.86 per share (with a downside risk of 1.05%) on revenues of $74.4 billion. In the year-ago quarter, Chevron recorded a gain of $2.49 per share (excluding adjustments for downstream asset sales and foreign-currency effects), while sales came in at $54.0 billion.

Third Quarter Recap

Chevron’s third-quarter 2011 results came in better than expected, riding on the back of higher oil prices and stronger refining margins. Earnings per share (excluding adjustments for foreign-currency effects) came in at $3.69, handsomely above the Zacks Consensus Estimate of $3.42 and the year-ago adjusted profit of $2.06. Quarterly revenue of $64,432 million was 29.6% higher from the prior-year quarter result of $49,718 million and was 14.7% above our projection.

Agreement of Analysts

There has been a downward bias among the analysts regarding Chevron’s outlook. In particular, we see a notable number of estimate revisions over the past 30 days.

Out of the 14 analysts covering the stock, 10 have lowered their estimates for the fourth quarter of 2011, while none have gone in the opposite direction.

Magnitude of Estimate Revisions

Consequent to analysts revising estimates southward over the past 30 days, the Zacks Consensus Estimate for the quarter has gone down by 44 cents (from $3.30 to $2.86).

Surprise History

The company has surpassed the Zacks Consensus Estimate in each of the last 4 quarters, performing consistently during this period. But this time, we will be surprised if Chevron reports better-than-expected results yet again, particularly after it issued an interim update warning of weaker profits on the back of a refining slump.   

Our Recommendation

Chevron shares currently retain a Zacks #3 Rank, which translates into a short-term 'Hold' rating. We are also maintaining our long-term Neutral recommendation on the stock.

Chevron is one of the largest integrated energy companies in the world and has an impressive business model. Its current oil and gas development project pipeline is among the best in the industry, boasting large, multiyear projects. Additionally, Chevron possesses one of the healthiest balance sheets among peers, which helps it to capitalize on investment opportunities with the option to make strategic acquisitions.

However, due to its integrated nature, Chevron is particularly susceptible to the downside risk from any weakness in the global economy. We are also concerned by the company’s high level of capital spending, which may result in reduced returns going forward.

As such, we see the stock performing in line with the broader market and prefer to remain on the sidelines.

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CONAGRA FOODS (CAG): Free Stock Analysis Report
 
CHEVRON CORP (CVX): Free Stock Analysis Report
 
SARA LEE (SLE): Free Stock Analysis Report
 
TYSON FOODS A (TSN): Free Stock Analysis Report
 
WAL-MART STORES (WMT): Free Stock Analysis Report
 
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