We currently maintained our Neutral recommendation on
ConAgra Foods Inc.
), a world leader in providing branded and value added food
services. Headquartered in Omaha, the company had approximately
26,100 employees as of fiscal 2012 end.
The line of acquisitions for the company seems to merge well
with its operations, achieving laudable results. In November
2012, the company announced its plans to acquire Ralcorp Holdings
Inc., which is the largest private label food company in the US.
Management expects cost synergies of roughly $225 million once
the acquired company is fully integrated.
A significant contribution is expected from CongAgra Foods'
Lamb Weston potato business considering the trend in the past.
Along with this, the company maintained a strict control on
operating costs, striving to keep high margins.
However, it shouldn't be overlooked that the company operates
in a highly competitive industry, where the customers are
price-sensitive. This could lead to a reduction in the prices of
products and services despite an increase in the total costs,
thereby squeezing the margins.
ConAgra's results in the second quarter of 2013 showed signs
of improvement based on the increase in the potato business,
moderate inflation and contribution from acquired businesses. The
company exited the quarter with a strong balance sheet.
Revenue for the reported quarter increased 8.9% year over year
to $3,735.5 million. However, it was outshined by an 8.1%
increase in the total costs. Earnings per share were 44 cents for
the quarter. Operating margin was recorded at 8.4% as against
7.7% during the year-earlier quarter.
The current Zacks Consensus Estimate for the third quarter is
55 cents, an increase of roughly 7.3% year over year. Estimates
for 2013 and 2014 are $2.09 and $2.30, respectively. These
represent annual increase of 13.6% in 2013 and 10.1% in 2014.
Currently, we maintain a Neutral recommendation on ConAgra
Foods Inc. The stock also bears a Zacks #2 (Buy) Rank, while its
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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