ConAgra Posts Upbeat Fiscal 1Q13

ConAgra Foods Inc. (CAG - Analyst Report) reported upbeat financial results for the fiscal first quarter 2013 (ended August 26, 2012). Earnings per share from continuing operations were 61 cents as against 22 cents reported in the year-ago quarter.

However, diluted earnings per share from continuing operations, adjusted for items impacting comparability, was recorded at 44 cents versus 31 cents reported in the year-ago quarter. Results surpassed the Zacks Consensus Estimate of 36 cents.

Revenues

Net sales improved 6.7% to $3,311.9 million from $3,105.3 million in the year-earlier quarter, driven by improved pricing, moderating inflation and contribution from acquired businesses. Reported revenue was above the Zacks Consensus Estimate of $3,234 million.

On a segmental basis, Commercial Foods surged 4.6% year over year to $1,269.3 million, led by the benefit of favorable price-mix and healthy growth in the Lamb Weston potato operations. Revenues from the Consumer Food segment rose 8.0% to $2,042.6 million during the quarter. The rise reflects contribution from favorable acquisitions and price/mix.

Margins

In the reported quarter, cost of goods sold (COGS) inched down 2.7% from the year-earlier quarter to $2,440.6 million. SG&A (selling, general and administrative) expense was $453.9 million, up 11.6% year over year. Net interest expense was recorded at $49.3 million, down 6.8% year over year. Operating margin was recorded at 11.1% as against 4.4% during the year-earlier quarter.

Balance Sheet/Cash Flow

Cash and cash equivalents at end of fiscal first quarter 2013 were $116.5 million, an increase from $103.0 million in the previous quarter. Senior long-term debt remained roughly flat to $2,663.8 million sequentially .

Net cash flow from operating activities in the reported period was $323.9 million as against $315.1 million generated in the year-ago comparable quarter. Capital spending was up 3.1% to $98.6 million.

During the quarter, the company paid dividends amounting to $97.9 million and repurchased 2.95 million shares worth $75 million. Roughly $450 million share repurchase authorization was available for the company.

Management also announced that they have received the Board of Directors’ approval for an increase of a cent in quarterly dividend rate to 25 cents. Revised annualized dividend rate now stands at $1.00 per share. The new dividend will be paid on December 4, 2012 to shareholders of record as of October 31, 2012.

Guidance

For fiscal 2013, ConAgra revised its earnings per share (adjusted for items impacting comparability) guidance range to $2.03-$2.06. Marketing expenses in the year are expected to get a boost versus fiscal 2012. Tax rate is anticipated to be roughly 34% for the year. Operating cash flow is expected to be over $1.2 billion.