ConAgra Foods Inc
) reported impressive financial results for the fiscal second
quarter 2013 (ended November 25, 2012). The company's earnings
per share from continuing operations in the quarter were 51 cents
as against 43 cents reported in the year-ago quarter.
However, diluted earnings per share from continuing
operations, adjusted for items impacting comparability were
recorded at 57 cents versus 49 cents reported in the year-ago
quarter. Results surpassed the Zacks Consensus Estimate of 55
Net sales improved 8.9% to $3,735.5 million from $3,431.7
million in the year-earlier quarter, driven by improved potato
operations, moderating inflation and contribution from acquired
businesses. Reported revenue was above the Zacks Consensus
Estimate of $3,691 million.
On a segmental basis, revenue from Commercial Foods surged
4.7% year over year to $1,312.4 million, led by the benefit of
favorable price-mix and healthy growth in the Lamb Weston potato
operations. Revenue from the Consumer Food segment rose 11.2% to
$2,423.1 million during the quarter. The rise reflects
contribution from favorable acquisitions and price/mix, slightly
offset by an organic revenue volume decline.
In the reported quarter, cost of goods sold (COGS) shot up
7.3% from the year-earlier quarter to $2,872.6 million. SG&A
(selling, general and administrative) expense was $496.7 million,
up 13.2% year over year. Net interest expense was recorded at
$53.4 million, up 5.5% year over year. Operating margin was
recorded at 8.4% as against 7.7% during the year-earlier
Balance Sheet/Cash Flow
Cash and cash equivalents at end of fiscal second quarter 2013
were $476.8 million, an increase from $116.5 million in the
previous quarter. Senior long-term debt increased to $3,413.4
from $2,663.8 million at the end of first quarter of fiscal
Net cash flow from operating activities in the reported period
was $154.7 million as against $174.8 million generated in the
year-ago comparable quarter. Capital spending was up 26.0% to
During the quarter, the company paid dividends amounting to
$97.4 million and repurchased 6.1 million shares worth $170
Subsequent to the quarter end, the company announced its plans
to buy Ralcorp Holdings at $90 per share in cash. The acquisition
is expected close in the first quarter of calendar 2013.
For fiscal 2013, ConAgra expects earnings per share (adjusted
for items impacting comparability) to be at least $2.06, changed
from the previously announced range of $2.03-$2.06. For the
Consumer Foods segment, the productivity savings are expected to
exceed $250 million along with the input cost inflation to be
roughly 2% -3%.
Tax rate is estimated to be roughly 34% for the year.
Operating cash flow is expected to be over $1.2 billion.
We currently have a Neutral recommendation on CAG. The stock
bears a Zacks #2 (Buy) Rank, while its prime competitors
H J HEINZ CO
BRF Basil Food
) carry a Zacks #3 (Hold) Rank.
BRF-BRASIL FOOD (BRFS): Free Stock Analysis
CONAGRA FOODS (CAG): Free Stock Analysis
HEINZ (HJ) CO (HNZ): Free Stock Analysis
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