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ConAgra Foods Inc. (CAG - Analyst Report), a North American branded and value-added food company, posted disappointing results for fiscal third quarter 2013. ConAgra’s diluted earnings per share from continuing operations, adjusted for items impacting comparability were recorded at 55 cents versus 51 cents reported in the year-ago quarter, increasing by 7.8%. However, earnings missed the Zacks Consensus Estimate of 57 cents by 3.5%.

Revenues: Net sales improved 13.4% to $3,850.5 million from $3,396.0 million in the year-earlier quarter, driven by increased volumes and contribution from acquired businesses. Reported revenue marginally missed the Zacks Consensus Estimate of $3,869.0 million.

On a segmental basis, revenue from Commercial Foods increased 1.3% year over year to $1,255.5 million, led by the benefit of a favorable price-mix, increased productivity along with a contribution from the Lamb Weston potato operations.

Revenue from the Consumer Foods segment rose 6.8% to $2,303.2 million during the quarter. The rise reflects contribution from favorable acquisitions and price/mix, slightly offset by an organic revenue volume decline.

ConAgra established new segments to represent the revenues from Ralcorp Holdings acquired in January. Ralcorp Frozen Bakery Products and Ralcorp Food Group recorded revenues of $79.3 and $212.5 million, respectively. 

Margins/Costs: In the reported quarter, ConAgra’s COGS (cost of goods sold) shot up 14.1% from the year-earlier quarter to $2,976.5 million. SG&A (selling, general and administrative) expense was $614.0 million, up 72.1% year over year, due to the integration of Ralcorp. Operating margin was recorded at 11.8% as against 14.2% during the year-earlier quarter, resulting from an increase in operating expenses.

Balance Sheet: Cash and cash equivalents at end of fiscal third quarter 2013 were $723.8 million, an increase from $247.0 million in the previous quarter. Senior long-term debt increased to $9,649.4 from $3,413.4 million at the end of second quarter of fiscal 2013. The increase was a result of debt incurred to fund the Ralcorp acquisition.

ConAgra also announced a dividend payment of 25 cents per share to the shareholders as of Apr 30, to be paid on May 31.

During the quarter, ConAgra acquired Ralcorp Holdings for $90.0 per share in cash.

Guidance: For fiscal 2013, ConAgra reaffirmed its earnings per share (adjusted for items impacting comparability) guidance at $2.15. It is also expected that Ralcorp will contribute to the earnings in fiscal 2013 and 2014 to the tune of 5 cents and 25 cents per share, respectively.

ConAgra currently carries a Zacks Rank #2 (Buy). Other stocks worth a look in the food industry are Flowers Foods Inc. (FLO - Snapshot Report), which carries a Zacks Rank #1 (Strong Buy); along with Campbell Soup Company (CPB - Analyst Report) and BRF - Brasil Foods S.A. (BRFS - Snapshot Report) both of which carry a Zacks Rank #2 (Buy).

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