Friday, March 18, 2011

ConAgra Foods (NYSE: CAG): Q3 Earnings Preview 2011

ConAgra Foods, Inc. (NYSE: CAG) is scheduled to release fiscal third quarter earnings before the opening bell on Thursday, March 24, 2011. Analysts, on average, expect the company to report earnings of $0.47 per share on revenue of $3.13 billion. In the year ago quarter, the company reported earnings of $0.44 per share on revenue of $3.10 billion.

ConAgra Foods, Inc. operates as a food company in North America and internationally. It operates in two segments, Consumer Foods and Commercial Foods. 

In the preceding fiscal second quarter, the Omaha, Nebraska-based company's net income was $200.9 million or $0.45 per share, compared with a profit of $239.7 million or $0.54 per share in the prior-year quarter. Excluding items impacting comparability, adjusted earnings from continuing operations for the quarter declined 13% to $0.45 per share from $0.52 per share in the year-ago quarter. Revenue increased 2% to $3.16 billion from $3.10 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of $0.45 per share on revenue of $3.13 billion.

At its last earnings call in December, the company said that it expects year-over-year earnings improvement for the third and fourth quarters, with earnings being higher in the fourth quarter than in the third quarter largely due to the timing of price increases. The company also expects to gain market share and expand sales in the following areas in the next year: single and multi-serve frozen meals, snacks, frozen desserts and sweet potatoes as well as in international sales, specifically in Canada, Mexico and India.

Last month, the company confirmed that it is on track to meet its fiscal 2011 earnings per share expectations, previously communicated as a low single-digit rate of earnings per share growth over the comparable $1.74 earned in fiscal 2010. ConAgra said that said sales in the second half of 2011 would be helped by price increases. With regard to the long-term financial outlook, the company expects around 3% annual sales growth and 6% - 8% earnings per share growth annually, adjusted for items impacting comparability. The company expects Return on Invested Capital to be 13-14%. In addition, ConAgra Foods expects to repurchase shares and invest in growth, both organically and through acquisitions, as opportunities arise.

The company expects its consumer foods segment to benefit from higher pricing, merchandising actions, strong productivity, lower SG&A, and accelerating contribution from innovation and recently acquired businesses.

As part of the company's efficiency initiatives, ConAgra recently approved restructuring plan that will result in an estimated $65 million of pre-tax charges over an 18-month period. Approximately $25 million of these charges represent a cash outlay.

The company's stock currently trades at a forward P/E (fye May 30, 2012) of 11.77 and PEG Ratio (5 yr expected) of 1.71. In terms of stock performance, ConAgra shares have lost nearly 10% over the past year.

Full Disclosure: None.
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