ConAgra Jumps On Mid and Long-Term Growth Forecasts

Michael Teague  |

ConAgra Foods (CAG), purveyor of classic American staples such as Slim Jims, Hebrew National hot dogs, Marie Calendar’s and Healthy Choice frozen meals, and Chef Boyardee canned raviolis reported quarterly earnings early on Thursday to the delight of investors, who sent the stock up over 6 percent at one point to $35.54, less than a dollar from its 52-week high of $36.31.

For the fiscal fourth quarter, ConAgra’s net income was $192.2 million, or an adjusted $0.60 per share on revenue of $4.59 billion, compared to the prior-year period during which the company lost $86.2 million, or $0.21 per share on revenue of $3.43 billion. An average of analysts’ estimates had seen the company earning and adjusted $0.59 per share on revenue of $4.6 billion.

While revenue and profits came in more or less flat with expectations, the red meat in the report came from the company’s expectations of 10 percent earnings growth annually between 2015 and 2017. The company also revised its long-term growth prospects upwards, forecasting 7 to 9 percent earnings growth in place of the previous 6 to 8 percent, and 3 to 4 percent sales growth, slightly ahead of the previous estimate of 3 percent.

The company estimated, however, that full-year earnings would be $0.08 short of the expected $2.48, but has attributed this to complications with its commercial foods segment that include the expiration of a contract with an as yet unidentified purchaser of its potato products. Furthermore, the company expects earnings to take a $0.03 per share loss as a result of its merging milling operations with Cargill and CHS Inc. (CHSCP).

At the same time, ConAgra claimed that it is already seeing increased profits from two key acquisitions it has made over the past year, first with its purchase of Unilever’s frozen meals division last August, and then with Ralcorp Holdings Inc. this past January. That latter, in particular, added an additional $962 million in sales for the recently ended period. Both acquisitions are expected to save the company some $300 million a year, up from original estimates of $225 million.

The $13.7 billion market-cap company has seen its stock up 15 percent in 2013, and 36 percent over the past 12 months.

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