ConAgra Foods, Inc.
(
CAG
) recently reported solid fiscal first quarter 2013 results, which
included a raised fiscal 2013 guidance, an increased quarterly
dividend and an expansion plan in Arkansas. The stock hit its
52-week high of $27.75 on September 20, the same day of its
earnings announcement. This Zacks #2 Rank (Buy) maker of processed
and packaged food has now generated four straight quarters of
earnings surprises with an average beat of 10.9%, and offers a
solid dividend yield of 3.7%.
Driving Catalysts
Last week, ConAgra Foods reported fiscal first quarter 2013 (ended
August 26, 2012) adjusted earnings per share of 44 cents, topping
the Zacks Consensus Estimate by 25.7% and improving upon last
year's performance of 31 cents by 41.9%.
Revenue grew 6.7% to $3,312 million thanks to improved pricing and
strengthening businesses at the Commercial and Consumer segments.
Operating margin was recorded at 11.1%, against 4.4% last year.
For fiscal 2013, ConAgra revised its adjusted earnings per share
guidance to between $2.03 and $2.06. Previously, the company was
calling for an increase of 6% to 8% over 2012 earnings of $1.84,
implying a range of $1.95 - $1.99. Also, the company's Board of
Directors approved a one cent increase in the quarterly dividend
rate, which now stands at 25 cents. The revised annualized dividend
rate came in at $1.00 per share.
Moreover, ConAgra Foods plans to expand its plant in the
Russellville, Arkansas area by investing $100 million to
accommodate the making of Bertolli and P.F. Chang's frozen meals.
The expansion is likely to create at least 80 new jobs.
Earnings Estimates Move Higher
Over the last 7 days, nine of 11 estimates were revised upward for
fiscal 2013, boosting the Zacks Consensus Estimate by 4.5% to $2.07
per share. Meanwhile, the Zacks Consensus Estimate for 2014 moved
up 3.8% to $2.20 as 7 of 12 estimates advanced. These outlooks
suggest year-over-year growth of 12.3% for 2013 and 6.2% for 2014.
Dividend
ConAgra has been regularly paying a dividend and increasing the
quarterly rates at intervals since 1977. The 5-Year average
dividend yield for ConAgra Foods stands at 3.6%, while the stock
currently yields a solid 3.7% based on an annual dividend rate of
$1.00 per share.
Valuation
ConAgra Foods is currently trading at a forward P/E of 13.3x
compared with 15.7x for the peer group. The company's PEG ratio is
currently at 1.92. ROE stands at 16.9% compared with the peer group
average of 20.5%.
As can be observed from the Price & Consensus chart below; the
company has been consistently performing well since 2009. Prospects
appear bright as the Zacks Consensus Estimates are trending higher
for future years.
Headquartered in Omaha, Nebraska, ConAgra Foods was incorporated in
1919. The $11.2 billion company is one of North America's leading
food processed and packaged food companies. With brands reaching
almost 97% of North American homes, ConAgra Foods sells nearly 12.3
million packages of food products each day, including 3.8 million
frozen food packages.
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