UPDATE: ConAgra 4Q Earnings Miss Estimates On Rising Costs

ConAgra Foods Inc.'s (CAG) fourth-quarter results were hit by a sharp rise in input costs, which the food company was unable to fully offset by raising prices and cutting costs elsewhere.

ConAgra also forecast more pain as input costs are expected to rise up to 8% in fiscal 2012, taking a bite out of earnings. The company said per-share earnings for the current quarter are expected to fall from a year earlier, while full-year earnings are seen growing in the "low- to mid-single digits," below long-term guidance of 6% to 8% growth.

Shares fell 3% in premarket trading to $24.65.

The challenging forecast comes as ConAgra is locked in a standstill in an attempt to buy Ralcorp Holdings Inc. (RAH), the maker of private-label products, as well as Post cereal brands. RalCorp rejected ConAgra's $4.9 billion buyout offer last month, but ConAgra still wants to do the deal to become a more dominant player in private-label foods, sales of which have grown as consumers gravitate to lower prices.

In the meantime, the maker of Healthy Choice meals, Slim Jim meat snacks and Reddi-wip is trying to raise prices enough to mitigate rising cost pressures, which show no signs of abating. ConAgra increased prices on cooking oils, frozen foods, snacks and other items in the latest quarter, and plans to take "responsible pricing actions" to offset costs.

The higher costs pushed down gross margins to 22% in the fourth quarter from 24.2% a year ago.

Many of ConAgra's own products face increased competition from retailer's private-label brands, which constrains the ability to raise prices without impacting volume. ConAgra's consumer business, which makes up the bulk of sales, saw volume fall 3% during the quarter through sales rose slightly, with help from higher prices.

The smaller commercial-foods segment's sales jumped 15% as profit rose 14%.

For the quarter ended May 29, ConAgra reported a profit of $254.9 million, or 61 cents a share, up from $90.6 million, or 20 cents, a year earlier. Excluding items such as restructuring charges, earnings from continuing operations rose to 47 cents a share from 39 cents. Sales rose 5.3% to $3.21 billion.

Analysts polled by Thomson Reuters had most recently forecast earnings of 48 cents on revenue of $3.19 billion.

-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com

--Melodie Warner contributed to this article.

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