KFT Mondelez International, Inc. (MM)

ConAgra Foods Inc. (CAG) will be reporting its fourth-quarter 2012 results on Thursday, June 21, 2012.

The current Zacks Consensus Estimate for earnings per share is 50 cents, representing an annualized growth of 5.47%.  

With respect to earnings surprises over the trailing four quarters, CAG outperformed the Zacks Consensus Estimate in two quarters and underperformed in the rest.  Average earnings surprise was 1.86%, implying that the company outperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Third Quarter 2012 Highlights

On March 22, 2012, ConAgra Foods Inc.reported third-quarter fiscal 2012 results, with diluted earnings per share (from continuing operations) of 65 cents, up 25% from 52 cents in the year-ago quarter.

The improvement in results reflect benefit from the company’s total margin management efforts, including price increase in operating segments as well as cost savings. The results beat the Zacks Consensus Estimate of 49 cents.

Net sales improved 7.4% from the year-earlier quarter to $3,373.1 million from $3,141.3 million, based on improved volumes, favorable price/mix and strategic increase in prices to mitigate rising input cost. Reported revenue was above the Zacks Consensus Estimate of $3,364 million.

Agreement of Estimate Revisions   

In the last 30 days, no analyst increased or decreased the company’s earnings per share estimates for the fourth quarter of 2012, as there was no catalyst for such change. Also, none increased or decreased the same for fiscal 2012. However, one analyst increased its estimate, while none decreased the same for fiscal 2013 in the last 30 days.

Magnitude of Estimate Revisions   

Estimates over the last 30 days remained static at 50 cents per share for the fourth quarter of 2012.

Estimate for fiscal 2012 increased marginally from $1.77 to $1.78 over the last 30 days while that for fiscal 2013 showed a similar trend of increase from $1.93 to $1.94. These estimates represented a year-over-year growth of 1.43% and 9.08% for 2012 and 2013, respectively.

Our Take   

ConAgra is likely to post encouraging results in the fourth quarter and fiscal 2012. The company’s balanced pricing, smart marketing and cost-saving initiatives deliver tremendous value to consumers, which will be reflected in the upcoming results. We are optimistic on company’s great business prospects in its renowned brands, which will certainly raise market share going ahead.

The company has been facing challenges from private label suppliers as well as big banners like HJ Heinz Co. (HNZ) and Kraft Foods Inc. (KFT). Therefore, fierce competition may shrink the company’s market shares while affecting ConAgra’s profits.

We currently maintain a long-term ‘Neutral’ recommendation on the stock. Hormel has a Zacks #3 Rank, which translates into a short-term (1-3 months) ‘Hold’ rating.

 
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