ConAgra Falls on Reduced Outlook for Q4 - Analyst Blog

Shares of food products company ConAgra Foods, Inc. CAG slumped over 7% on Jun 18, to close at $30.47, due to a reduction in the expected earnings per share for the fourth quarter of fiscal 2014 (ended May 25, 2014).  

ConAgra announced that its fiscal fourth-quarter results might not live up to its earlier expectations. A 7% decrease in the Consumer Foods volume, coupled with weak profits for the Private Brands segment caused the decline in estimates. The Private Label brands is expected to experience a year-over-year decline of $60 million in operating profit for fiscal fourth-quarter. Currently, the expected adjusted earnings have been reduced to 55 cents per share, from the prior projection of 60 cents.

Management is planning to take proactive measures like improving product mix and promotion strategies in order to enhance volumes in the Consumer Goods segment and is optimistic for higher volumes in fiscal 2015. Moreover, considering the profit decline in the Private Label brands, the company aims to manage costs effectively and improve margins for the segment. 

ConAgra anticipates earnings per share for fiscal 2015 to grow in mid-single digits, with an expected increase to high-single digits in fiscal 2016 and 2017. Although earnings per share for fiscal 2014 are not up to earlier expectations, the company has maintained its guidance for operating cash flow and debt reduction targets. It also plans to continue the annual dividend payout of $1.00 per share.

ConAgra is expected to announce its fiscal fourth-quarter 2014 results on Jun 26, before the market opens. The Zacks Consensus Estimate for the same stands at 62 cents per share, reflecting a year-over-year hike of 3.6%.

With a market capitalization of $12.8 billion, ConAgra holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include BRF S.A. BRFS, The Hain Celestial Group, Inc. HAIN and Inventure Foods, Inc. SNAK. While BRF sports a Zacks Rank #1 (Strong Buy), The Hain Celestial Group and Inventure Foods hold a Zacks Rank #2 (Buy).

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