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ConAgra Beats on Q3 Earnings, Lags Revs

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ConAgra Foods, Inc. (CAG - Free Report) reported improved year-over-year results for the third quarter of fiscal 2014 (ended Feb 23, 2014). Earnings per share from continuing operations, adjusted for items impacting comparability, in the quarter were 62 cents, up 13% from 55 cents in the year-ago quarter. The bottom line also surpassed the Zacks Consensus Estimate of 60 cents.

On a GAAP basis, ConAgra generated earnings per share of 58 cents, up 107% year over year. The rise in earnings is attributable to a hike in revenues.


ConAgra generated $4,389.7 million in revenues in the quarter, exceeding the year-ago sales by 14.5%. However, revenues missed the Zacks Consensus Estimate of $4,394.0 million.

On a segment basis, revenues from Consumer Foods decreased 3.5% year over year to $1,870.4 million. The results reflect negative volume and price/mix impacts. Also, foreign exchange transactions negatively impacted segment revenues by 1%.

Revenues from the Commercial Foods segment fell 0.7% year over year to $1,456.0 million due to lower sales from the Lamb Weston potato business, partially offset by contribution from acquisitions. The Private Brands segment generated $1,063.3 million in revenues, up a considerable 148.5% over the year-ago tally of $427.9 million. The rise in segment revenues is primarily due to the accretive Ralcorp acquisition.


In third-quarter fiscal 2014, ConAgra reported a 15.2% year-over-year increase in its cost of sales. Higher expenses pulled down gross margin by 50 basis points to 22.2%. Selling, general and administrative (SG&A) expenses decreased 10.1% and stood at 12.5% as a percentage of revenue. Interest expenses shot up 34.6% year over year in the quarter to $95.0 million.

Balance Sheet/Cash Flow

Exiting third-quarter fiscal 2014, ConAgra had cash and cash equivalents of $239.2 million, significantly up from $192.7 million at the end of the previous quarter. Senior long-term debt stood at $8,564.8 million (excluding current portion), down marginally from $8,575.2 million in the preceding quarter.

In the nine months ending Feb 2014, ConAgra generated cash flow of $937.4 million from operating activities from continuing operations, up from $780.8 million generated in the year-ago period. Capital spent on additions of property, plant and equipment totaled $471.0 million, up 64.7% year over year.

During the quarter, ConAgra paid dividends worth $105.0 million.


Due to mixed segmental results for the third quarter of fiscal 2014, the company maintained its previous earnings per share (adjusted for items impacting comparability) guidance in the range of $2.22 to $2.25. ConAgra is expected to repay roughly $550 million of debt in the fiscal year, generating operating cash flow of $1.4 billion.

Also, ConAgra expects to witness annual earnings per share growth of 10% in the fiscal 2016-2017 period, benefiting largely from the Ralcorp acquisition.

ConAgra‘s current market capitalization is $12.4 billion and has a Zacks Rank #4 (Sell). Some better-ranked stocks in the food industry include Unilever plc (UL - Free Report) , Diamond Foods, Inc. and Inventure Foods, Inc. . While Unilever carries a Zacks Rank #1 (Strong Buy), Diamond Foods and Inventure Foods hold a Zacks Rank #2 (Buy) each.

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