UPDATE: ConAgra 2Q Profit Up 43% As Margins Climb; View Raised Again

ConAgra Foods Inc.'s (CAG) fiscal second-quarter earnings jumped 43% amid lower commodities costs and market-share gains at its consumer-foods business.

Results beat analysts' expectations, and the company again raised its earnings forecast for the year, this time by 3 cents to $1.73 a share, to reflect a strong first-half performance.

Packaged-food makers' sales have benefited this year as consumers eat more meals at home and as commodities prices have retreated from peaks hit last year. ConAgra is among the companies selling consumer staples that have raised their dividends in recent months.

During a conference call, executives said the company will evaluate the possibility of buying back shares as one way of using its cash. In the latest quarter, the consumer foods business benefited from increased marketing and the recent launch of new varieties of existing brands, they said.

In an interview, ConAgra Chief Executive Gary Rodkin said the company will consider making acquisitions, but that it isn't considering large "transformational" deals at the present time. A key focus over coming quarters will be to keep expanding brands like its Healthy Choice and Marie Callender's meals by improving marketing and launching new products, he said.

Rodkin said his own conversations with consumers and visits to stores indicate that consumers are staying cautious despite some improvements in the economy. "People are going to be demanding more for their dollar," he said.

For the quarter ended Nov. 29, the maker of Chef Boyardee pasta, Hunt's ketchup and Peter Pan peanut butter reported a profit of $239.7 million, or 54 cents a share, compared with $168.1 million, or 37 cents a share, a year earlier. Excluding hedging and other impacts, earnings from continuing operations rose to 52 cents from 43 cents.

Revenue decreased 2.4% to $3.17 billion, as commercial-foods segment sales slid 11%.

Analysts polled by Thomson Reuters most recently forecast earnings of 47 cents on revenue of $3.33 billion.

Gross margin climbed to 26.9% from 21.1% on lower ingredient costs.

At its consumer-foods unit, its largest, sales rose 3% amid strong sales of its Banquet, Chef Boyardee, Healthy Choice and Marie Callender's and other brands. Volume grew by 2% and earnings climbed 31% amid the lower costs.

At its commercial-foods segment--which includes dehydrated vegetables and seasonings, as well as milled grain products--sales fell 11% amid lower flour prices and food-service industry woes. Still, profit was up 1%.

ConAgra's shares recently fell 26 cents, or 1.2%, to $21.90.

-By Tess Stynes and Anjali Cordeiro, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com

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