KFT Mondelez International, Inc. (MM)

ConAgra Foods Inc. (CAG) reported fourth-quarter and fiscal 2012 loss per share from continuing operations of $0.21 (as reported), down from earnings per share of $0.61 reported a year ago. The loss per share included a benefit of $0.02 from pension accounting changes.

However, diluted earnings per share from continuing operations adjusted for items impacting comparability was recorded at $0.51 in the fourth quarter of 2012. This included net expense of $0.72 for the current quarter.

The adjusted earnings per share increased 9% year over year compared with $0.47 in the year-ago period. Fourth quarter 2011 earnings per share included a net benefit of $0.14.

For FY12, diluted earnings per share (from continuing operations) came in at $1.12, which includes benefit of $0.08 from the pension accounting changes, whereas diluted earnings per share adjusted for items impacting comparability was recorded at $ 1.84.

Revenues

Net sales improved 6.3% from the year-earlier quarter to $3,413.6 million from $3,210.0 million, based on improved pricing, moderating inflation and contribution from acquired businesses. Reported revenue was above the Zacks Consensus Estimate of $3,398 million.

On a segmental basis, Commercial Foods surged 6.8% y/y to $1,263.9 million, led by the benefit of a commodity-driven price rise in the segment. Revenues from the Consumer Food segment rose 6.1% to $2,149.7 million during the quarter. The rise reflects contribution from favorable price/mix.

For full year, revenue was reported at $13,262.6 million, compared with $12,303.1 million a year-ago.

Margins

In the reported quarter, cost of goods sold (COGS) increased 9.1% from the year-earlier quarter to $2,732.7 million. SG&A (selling, general and administrative) expense was $786.1 million, up 184.7% year over year. Net interest expense was recorded at $50.8 million, down 7.5% year over year. Operating margin was recorded at 11.9%, down compared with 15.3% during the year-earlier quarter.

For FY12, operating margin was recorded at 12.1%, down compared with 13.3% recorded in FY11.

Cash Flow

Exiting fourth quarter, net cash flow from operating activities was recorded at $ 1,052.0 million compared with $1,352.3 million a year ago. Moreover, at the end of the quarter, additions to property, plant and equipment was recorded at ($336.7) million compared with ($466.2) million in the year-earlier quarter. 

Cash and cash equivalents at end of the period were $ 103.0 million, down from $ 972.4 million in the year-ago quarter.

During the quarter, the company completed acquisitions of Del Monte Canada, Odom’s Tennessee Pride, and Kangaroo Brands’ pita chip operations.

Guidance

For fiscal 2013, ConAgra expects earnings per share growth of 6-8% year over year, adjusted for items impacting comparability based on contributions from acquired businesses, continued growth in its Lamb Weston potato operations, and margin management. The company anticipates operating cash flow in excess of $1.2 billion.

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 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 #4 Rank, implying a short-term (1-3 months) Sell rating.

 
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