We currently maintain our Neutral recommendation on
ConAgra Foods Inc.
), a leading processed and packaged food company with brands in
over 97% of North American households.
We believe things are working in ConAgra Foods' favor as the
company posted solid earnings surprise in the last four trailing
quarters-average surprise being 11%. The recently concluded fiscal
first quarter 2013 impressed all as adjusted earnings per share
from continuing operations of 44 cents exceeded the year-ago
earnings of 31 cents and surpassed the Zacks Consensus Estimate by
Net sales grew 6.7% year over year to $3,312 million, based on
improved pricing, moderating inflation and contribution from
acquired businesses. Operating margins also improved in the
Remarkable fiscal first quarter 2013 results and expectations of
higher earnings growth through contributions from acquired
businesses, continued growth in Lamb Weston potato operations, and
margin management made the company raise its fiscal 2013 guidance.
Earnings per share growth are now expected to be within 10%-12% in
fiscal 2013, as against 6%-8% expected earlier.
Also, quarterly dividend rate increase and expansion plans in
Russellville, Arkansas have made the company an attractive stock to
look out for. However, the image gets a bit blurry with the rising
competitiveness in the food industry, especially from the private
label suppliers and producers. This is anticipated to lay an impact
on the company's market share and sales.
Adding to the peril is the rising cost of various raw materials,
such as wheat, corn, oats, soybeans, beef, pork and poultry used by
the company. The prices of these raw materials are at an all time
high and are predicted to induce a negative impact on profits for
Considering all these, we prefer to remain on the sidelines for
ConAgra Foods. The stock bears a Zacks #2 (Buy) Rank while its
HJ HEINZ CO.
Kraft Foods Inc.
) carry a Zacks #3 (Hold) Rank.
CONAGRA FOODS (CAG): Free Stock Analysis Report
HEINZ (HJ) CO (HNZ): Free Stock Analysis Report
KRAFT FOODS INC (KFT): Free Stock Analysis
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