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The Zacks Analyst Blog Highlights: ConAgra Foods, H J HEINZ, BRF Brasil Foods, Calpine and Alliant Energy

CAG BRFS CPN LNT

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For Immediate Release

Chicago, IL – December 31, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include ConAgra Foods Inc. ((CAG - Analyst Report)), H J HEINZ CO. (), BRF Brasil Foods ((BRFS - Snapshot Report)), Calpine Corporation ((CPN - Snapshot Report)) and Alliant Energy Corporation ((LNT - Snapshot Report)).

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Here are highlights from Friday’s Analyst Blog:

Earnings Scorecard: ConAgra

ConAgra Foods Inc. ((CAG - Analyst Report)), a leading North American food company, reported impressive fiscal second quarter 2013 (ended November 25, 2012) results. The company saw a significant rise in the earnings due to improvements in the Lamb Weston potato operations coupled with improved pricing. ConAgra, hopeful of further improvement in the future, also increased its earnings outlook for fiscal 2013.

Let’s take a brief look at the company’s financials for the fiscal second quarter 2013:

Earnings Review

The manufacturer of branded and non-branded food posted a 16.3% increase year over year in the earnings on a continuing basis, adjusted for comparability, to settle down at 57 cents for the quarter. The results surpassed the Zacks Consensus Estimate of 55 cents by 3.6%.

Revenue for the reported quarter improved 8.9% to $3,735.5 million from $3,431.7 million in the year-earlier quarter. Results in the quarter were driven by improved potato operations, moderating inflation and contribution from acquired businesses. Revenue outshined the Zacks Consensus Estimate of $3,691 million by 1.2%.

Agreement/Magnitude of Estimate Revisions

The recent quarter results along with the increase in guidance for fiscal 2013 by the management have triggered an estimate revision for the company in either direction. In the last 7 days, of the 7 estimates for 2013, 5 were revised upwards by the analysts covering the stock. However, out of the 12 estimates for 2014, 5 were revised upwards while 2 were lowered by the analysts in the last 7 days.

For the fiscal third quarter of 2013, from a total of 11 estimates, there were 2 positive revisions.

As for magnitude of estimate revision, in the last 7 days, estimate for the third quarter remained neutral at 55 cents. However, for 2013, estimates increased from $2.06 to $2.09 along with an increase from $2.25 to $2.30 for 2014.

The Zacks Consensus Estimates represents a year-over-year growth of 7.3% for third quarter, 13.6% for 2013 and 10.1% for 2014.

Our Take

The company seems to have a bright future in the Consumer Foods segment, following the acquisitions it has undertaken so far. The cost reduction activities are in place, leading to the possibility of higher earnings. The pending acquisition of Ralcorp Holdings Inc. is an added advantage, as it will lead to cost synergies in the future. We continue to expect the company to earn high revenues along with an increase in the earnings.

Currently, we maintain a Neutral recommendation on ConAgra Foods Inc. The stock also bears a Zacks #2 (Buy) Rank, while its prime competitors H J HEINZ CO. () and BRF Brasil Foods ((BRFS - Snapshot Report)) carry a Zacks #3 (Hold) Rank.

Calpine Closes Nat Gas Asset Sale

Wholesale utility play, Calpine Corporation ((CPN - Snapshot Report)) closed its Broad River Energy Center divestiture for an amount of $427 million plus adjustments (roughly $504 per kilowatt) to Broad River Power LLC, an associate of Energy Capital Partners LLC. Calpine received the go-ahead for the sale from the Federal Energy Regulatory Commission (“FERC”) on December 18, 2012.

The news of the divestment was earlier divulged during November 2012 at the time of the company’s third quarter earnings release. The Broad River Energy Center, situated in Gaffney, South Carolina is an 847 megawatt simple-cycle, natural gas-fired establishment.

Calpine has planned to realign its asset portfolio via a string of non-core asset sales. The Broad River Energy sell off was made to complement Calpine’s $432 million acquisition of Bosque Power Plant, which happens to be a combined cycle gas turbine ("CCGT") facility in Central Texas. The CCGT acquisition will enable Calpine to achieve thermal efficiency of about 60% compared to a simple cycle plant.

Followed by the Broad Energy sale, Calpine expects to earn $392 million from the year-end divestment of its Riverside Energy Center in Wisconsin. The company intends to plough back the proceeds from these sales for the development of its high-return resources.

Other key initiatives include the company’s development of the proposed 309 megawatt Garrison Energy Center, an energy-efficient natural gas based facility in Dover, Delaware.

With natural gas becoming a hotshot energy source in the U.S. utility market, we believe Calpine’s purchase of high-quality gas units will certainly boost the near-term earnings stream and bring future growth opportunities.

However, weather-induced demand volatilities leading to price fluctuations and unplanned outages resulting from winter storms could act as negative catalysts to growth. The Zacks Consensus Estimates for the fourth quarter and full year 2012 presently stand at a loss of 4 cents and earnings of 43 cents per share, respectively. 

Another utility player, Alliant Energy Corporation ((LNT - Snapshot Report)) is also eyeing to enhance its natural gas prospects. The company recently sought regulatory approval for the planned building of a 650 megawatt Marshalltown Generating Station (“MGS”) with the Iowa Utilities Board.

With a market capitalization of $8.38 billion, Texas-based Calpine Corp. has 2,101 employees in total. It owns and operates natural gas-fired and geothermal power plants in North America and currently retains a short-term Zacks #3 Rank (Hold rating).

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