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ConAgra Foods

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ConAgra Foods, Inc. (CAG - Free Report) touched a new 52-week high following the release of its strong fiscal second quarter report on December 20, which marked the fifth straight quarter with a positive earnings surprise. This Zacks Rank #2 (Buy) processed and packaged food maker also offers a solid dividend yield of 3.2%.

Driving Catalysts

For its fiscal second quarter, ConAgra reported adjusted earnings per share of 57 cents, which exceeded the Zacks Consensus Estimate by 3.6% and topped last year’s performance of 49 cents. Over the last 4 quarters, CAG has put together an average earnings beat of practically 9%.

Revenue increased 8.9% to $3.7 billion on the back of improved pricing and healthy performances at the Commercial and Consumer segments. Operating margin also improved to 8.4%, against 7.7% last year.

Earnings per share for fiscal 2013 are now expected to reach at least $2.06 per share, compared to the previously-expected range of $2.03 to $2.06.

Moreover, an added share driver for ConAgra was its agreement to acquire U.S. based private label food manufacturer Ralcorp Holdings, Inc. (RAH).This transaction will give rise to the largest private label packaged food company in North America. Also, ConAgra eyes expansion through a roughly $200 million investment in installing a new line to the plant at Lamb Weston frozen potato facility in Boardman, Ore.

Earnings Estimates Move Higher

The Zacks Consensus Estimate for fiscal 2013 gained 1.5% in the past 30 days to $2.09 per share, as 6 of 9 estimates were revised higher. The Zacks Consensus Estimate for fiscal 2014 advanced 2.7% in that time to $2.31. These estimates represent year over year growth of 13.7% for 2013 and 10.2% for 2014.


ConAgra has been regularly paying dividends and increasing the quarterly rates at intervals since 1977. The 5-Year average dividend yield for ConAgra Foods stands at 3.6%, while the stock currently yields a solid 3.2%, based on an annual dividend rate of $1.00 per share.


ConAgra Foods is currently trading at a forward P/E of 14.8x, compared with 16.2x for the peer group. The company’s PEG ratio is currently 1.86. ROE stands at 17.7%, compared with the peer group average of 21.2%.

Headquartered in Omaha, Nebraska, ConAgra Foods was incorporated in 1919. The $12.6 billion company is one of North America’s leading food processed and packaged food companies. With brands reaching almost 97% of North American homes, ConAgra Foods sells nearly 12.3 million packages of food products each day, including 3.8 million frozen food packages.

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