Updated Research Report on ConAgra - Analyst Blog

On Apr 10, 2014, we issued an updated research report on ConAgra Foods, Inc. CAG. The company reported improved year-over-year results for the third quarter of fiscal 2014 (ended Feb 23, 2014). Adjusted earnings per share in the quarter decreased roughly 13% year over year to 62 cents. Moreover, quarterly revenues of $4.4 billion were up 14.5% from the year-ago quarter.

Increase in revenues was primarily due to the inclusion of recently acquired Ralcorp in Jan 2013. The integration of Ralcorp is on track and is expected to contribute roughly 20 cents per share in fiscal 2014. Going forward, the Ralcorp acquisition is anticipated to drive the company's revenues significantly higher. Moreover, the company has been managing its costs appropriately which led to the growth in earnings in the third quarter of fiscal 2014.

However, the company's failure to restore the Private Brands segment to the desired operating profit level is being viewed as a negative. Lower margins in the Commercial Foods segment and lower volumes in the Consumer Foods segment further add to the woes. The loss of a major customer in Lamb Weston potato business also hampered revenues in the reported quarter.

Additionally, ConAgra faces intense competition from the manufacturers of branded, private brand and customized food products. This reduces the company's price control over its products, which may result in market share loss, fall in sales and operating margins.

With a market capitalization of $12.9 billion, ConAgra has a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry that warrant a look include Inventure Foods, Inc. SNAK, Diamond Foods, Inc. DMND and J&J Snack Foods Corp. JJSF, While Inventure Foods sports a Zacks Rank #1 (Strong Buy), Diamond Foods and J&J Snack Foods carry a Zacks Rank #2 (Buy).