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ConAgra Misses Q1 FY14 Earnings

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ConAgra Foods Inc. (CAG - Free Report) reported mixed financial results for the fiscal first quarter of 2014. The company reported earnings per share from continuing operations, adjusted for items impacting comparability, of 37 cents versus 44 cents in the year-ago quarter, representing a year-over-year decline of 15.9%. Earnings also missed the Zacks Consensus Estimate of 41 cents by 9.8%.

On a GAAP basis, ConAgra generated earnings per share of 33 cents, declining 45.9% year over year.

Revenues: Net sales jumped 27.2% to $4,201.8 million from $3,302.3 million in the year-earlier quarter, mainly driven by contribution from the Ralcorp acquisition. Reported revenues, however, missed the Zacks Consensus Estimate of $4,313.0 million.

On a segment basis, revenues from Commercial Foods decreased 0.4% year over year to $1,263.9 million. The increase in flour milling operations and better product mix were offset by a decline in the Lamb Weston potato business.  

Revenues from the Consumer Foods segment fell 1.8% to $1,995.9 million. The result reflects contribution from favorable acquisitions which was offset by a decline in the organic volume and a negative price/mix impact.

The newly established segments to represent the revenues from Ralcorp Holdings acquired in January mainly led to the top-line growth. While Ralcorp Frozen Bakery Products generated revenues of $238.6 million, Ralcorp Food Group recorded revenues of $703.4 million in the reported quarter.

Costs/Margins: In the reported quarter, ConAgra’s cost of goods sold shot up 38.5% from the year-earlier quarter to $3,370.9 million, resulting in a gross margin of 19.8%. Selling, general and administrative expenses were $559.4 million, up 24.2% year over year.

Financial Position: Cash and cash equivalents at the end of fiscal first quarter 2014 were $194.2 million, compared with $183.9 million at the end of fiscal fourth-quarter 2013. Senior long-term debt decreased to $8,622.2 million from $8,691.0 million at the end of the preceding quarter.

For the fiscal first quarter, ConAgra incurred capital expenditures of $181.1 million, compared with $98.4 million spent in the year-ago comparable quarter.

During the quarter, ConAgra paid dividends worth $105 million, compared with $98 million in the year-ago quarter. Total share repurchased totaled 876,000 shares, worth $31 million.

Subsequent to the quarter end, ConAgra sold one of its smaller brands, Lightlife, which included vegetarian-based burgers, hotdogs and other meatless frozen and refrigerated items. Additionally, the company purchased desert production assets from a former co-manufacturing partner.

Guidance: For fiscal 2014, ConAgra expects its earnings per share (adjusted for items impacting comparability) in the range of $2.34 to $2.38. The current expectations reflect a slower-than-expected start to the fiscal 2014. The company expects contribution from the Consumer Foods segment as well as Ralcorp to increase in the coming quarters. Based on this, ConAgra expects earnings per share of 55 cents in the second quarter of fiscal 2014.

Ralcorp is expected to generate roughly 25 cents in fiscal 2014, while the company’s new venture, Ardent Mills is expected to lower earnings by roughly 3 cents per share in fiscal 2014.

Other Stocks to Consider

Green Mountain Coffee Roasters, Inc. announced fiscal third-quarter 2013 operating earnings of 82 cents per share, beating the Zacks Consensus Estimate of 78 cents by 5.1%.

Pinnacle Foods Inc. (PF - Free Report) announced second-quarter 2013 operating earnings of 29 cents per share, beating the Zacks Consensus Estimate of 27 cents by 7.4%.

Boulder Brands, Inc. announced second-quarter 2013 operating earnings of 6 cents per share, beating the Zacks Consensus Estimate of 4 cents by 50.0%.

ConAgra currently carries a Zacks Rank #4 (Sell).

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