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ConAgra Q1 Earnings Beat Estimates, Outlook Reiterated - Analyst Blog

Food products company ConAgra Foods, Inc. ( CAG ) reported better-than-expected results for first quarter of fiscal 2015 (ended Aug 24, 2014). Earnings from continuing operations, adjusted for items impacting comparability, came in at 39 cents per share, up 5% from 37 cents earned in the year-ago quarter. The result also surpassed the Zacks Consensus Estimate of 35 cents.

However, on a Generally Accepted Accounting principles (GAAP) basis, ConAgra's earnings declined 17% year over year to 25 cents per share.

ConAgra Foods, Inc - Earnings Surprise | FindTheBest

Revenues

ConAgra generated net revenues of $3,701 million, reflecting a marginal year-over-year fall of 0.4%. However, the top line beat the Zacks Consensus Estimate of $3,693 million.

On a segmental basis, revenues from Consumer Foods edged down 1% year over year to $1,632.3 million. Volumes, price/mix and foreign currency impact were relatively flat year over year.

Revenues from the Commercial Foods segment climbed 1.8% year over year to $1,088.3 million, driven by a rise in sales from the Lamb Weston potato business. Volumes had a 3% positive impact, offset partially by 1% unfavorable price/mix. The Private Brands segment generated $980.4 million in revenues, down 1.7% year over year. As reported, volumes were down 3%.

Margins/Costs

ConAgra's cost of goods sold grew 2.5% year over year, representing 81% of total revenues as compared with 78.7% in the year-ago quarter. Selling, general and administrative (SG&A) expenses, as a percentage of revenue, declined 120 basis points (bps) to 13.3%. Operating income was $211.8 million with a margin of 5.7%.

Interest expenses dropped 12.6% year over year to $83.7 million due to a fall in debt levels.

Balance Sheet/Cash Flow

Exiting first-quarter fiscal 2015, ConAgra had cash and cash equivalents of $133.7 million, down compared with $183.1 million at the end of the previous quarter. Senior long-term debt (excluding current portion) stood at $7,720.9 million, down 9.9% from $8,571.7 million recorded in the preceding quarter.

ConAgra generated cash of $226.2 million from continuing operations, up 55.1% year over year. Capital spent on additions of property, plant and equipment totaled $111.7 million, down 35.8% year over year.

During the quarter, ConAgra paid dividends worth $105.5 million.

Outlook

In fiscal 2015, ConAgra expects all segments to grow from the current levels. Moreover, the company is expected to benefit from the Ralcorp acquisition and completion of the Ardent Mill transaction. The company anticipates annual earnings per share to grow in the mid-single digits range in fiscal 2015. Further, the company expects second-quarter earnings per share to be in line with the year-ago quarter.

In the coming fiscal, ConAgra expects to record savings of $50 million in SG&A expenses. Additionally, the company anticipates repaying roughly $1.0 billion of debt along with generating $1.6-$1.7 billion of operating cash flow. The company also plans to continue paying its annual dividend of $1.00 per share.

With a market capitalization of $13.5 billion, ConAgra Foods currently carries a Zacks Rank #2 (Buy). Some other stocks worth considering in the food industry include Aramark ( ARMK ), The Hain Celestial Group, Inc. ( HAIN ) and J&J Snack Foods Corp. ( JJSF ). While Aramark sports a Zacks Rank #1 (Strong Buy), both The Hain Celestial Group and J&J Snack Foods hold Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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