Conagra Brands initiated with an Equal Weight at Morgan Stanley

Morgan Stanley initiated coverage of Conagra Brands (CAG) with an Equal Weight rating and $27 price target The firm launched coverage of the U.S. packaged food industry with an In-Line view. Earnings visibility is low with sales growth expected to “remain muted” given ongoing secular consumption headwinds and constrained pricing power while accelerating commodity inflation and continued need for reinvestment limits margin expansion potential, the analyst tells investors in a research note. Morgan Stanley’s base case assumes a more stable backdrop for food consumption and a continuation of secular headwinds, resulting in a “widening dispersion of fundamental performance. The firm favors “advantaged categories, demonstrated pricing power, and thriving brands,” while being cautious names that face slower growth and higher reinvestment risk. Its Top Pick is BellRing Brands (BRBR), as the firm believes the recent pullback creatives a compelling entry point for a “scarce growth asset.” Among the large-caps, Morgan Stanley is Overweight Mondelez (MDLZ) for its “superior” long-term growth algorithm, and its thinks J.M. Smucker (SJM) offers upside.