ConAgra Misses by a Penny - Analyst Blog
December 20 2011 - 7:19AM
Zacks
On December 20, 2011, ConAgra Foods Inc. (CAG)
reported second quarter of fiscal 2012 results, with diluted EPS
(from continuing operations) of 41 cents compared with 45 cents in
the year-ago quarter.
This decline of 8.9% reflects negative impact of the
inflationary pressures in the company’s operating segments. The
results missed the Zacks Consensus Estimate by a penny.
Revenues
Net sales improved 8.1% from the year-earlier quarter to
$3,403.9 million from $3,147.5 million, primarily driven by a rise
in sales volume, favorable price/mix and strategic pricing actions
to mitigate rising input cost. Reported revenue was above the Zacks
Consensus Estimate of $3,318 million.
On a segmental basis, Commercial Foods jumped 16.1% to $1,225.7
million, led by improvement in Lamb Weston operations, volume
growth as well as pricing actions to cover increased input
costs.
Revenues from the Consumer Food segment rose 4.2% to $2,178.2
million during the quarter. The rise reflects increase in segmental
sales volume and price/mix.
Margins
In the reported quarter, cost of goods sold (COGS) increased
10.9% from the year-earlier quarter to $ 2,646.6 million. SG&A
(selling, general and administrative) expense was $ 455.8 million,
up 6.4% year over year. Net interest expense was recorded at $ 50.6
million, up 50.1% year over year. Operating margin was recorded at
12.3%, down marginally, compared with 12.9% during the year-earlier
quarter.
Cash Flow
Exiting second quarter net cash flow from operating activities
was recorded at $ 489.9 million, compared with $319.1 million a
year ago. Moreover, at the end of the quarter, additions to
property, plant and equipment was recorded at $ 160.5 million
compared with $ 211.0million in the year-earlier quarter.
Cash and cash equivalents at end of the period was reported at $
706.5 million, up from $ 545.2 million in the year-ago quarter.
Guidance
ConAgra reaffirms expectation of fiscal 2012 full-year diluted
EPS to grow at a low- to mid-single-digit rate, based on revised
inflation estimates, recent acquisitions and continued business
challenges, over the comparable EPS of $1.75 during fiscal 2011.
The company currently estimates that inflation for the Consumer
Foods segment will be in the range of 10% for the full fiscal
year.
ConAgra Foods has been significantly expanding its portfolio of
businesses over a number of years, focusing on branded, value-added
opportunities, through acquisition of a number of brands. Such
acquisitions have been adding depth and dynamism to its existing
product line of convenient meals, snacks and meal enhancers
eventually. This strategy of expansion continues with the latest
possession of Pretzel; which seems to have added another
prestigious feather in ConAgra’s honored cap.
Also, of late, the company announced approval of a $750 million
increase to the company’s share repurchase authorization, with no
expiration date. Shares are expected to be repurchased periodically
over several years, depending on market conditions and other
factors, through open-market or privately negotiated
transactions.
Omaha, Nebraska based ConAgra Foods Inc. is one of North
America’s leading food companies, serving grocery retailers,
restaurants and other foodservice establishments, with brands in
97% of America’s households. The company, over time, has given
tough competition to its peers, such as HJ Heinz
Co. (HNZ) and Kraft Foods Inc. (KFT).
We hold a Neutral recommendation on ConAgra over the long term.
Currently, Conagra has a Zacks #3 Rank, which implies a Hold rating
in the short term (1-3 months).
CONAGRA FOODS (CAG): Free Stock Analysis Report
HEINZ (HJ) CO (HNZ): Free Stock Analysis Report
KRAFT FOODS INC (KFT): Free Stock Analysis Report
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