ConAgra Misses on Earnings, Beats on Revenues - Analyst Blog

ConAgra Foods, Inc. CAG reported disappointing year-over-year results for the fourth quarter of fiscal 2014 (ended May 25, 2014). Earnings per share from continuing operations, adjusted for items impacting comparability, were 55 cents, down 8.3% from 60 cents in the year-ago quarter. The bottom line also missed the Zacks Consensus Estimate of 57 cents.

On a GAAP basis, ConAgra generated loss of 76 cents per share, compared to earnings of 45 cents per share in the year-ago quarter. The fall in the bottom line is attributable to a decline in the top line.

For fiscal 2014, the company generated adjusted earnings of $2.17 per share, increasing by a cent year over year. However, earnings missed the Zacks Consensus Estimate of $2.18 per share. On a GAAP basis, the company generated earnings of 70 cents per share, down considerably from $1.85 per share in fiscal 2013.

Revenues

ConAgra generated revenues of $4,436.8 million, down 2.8% from the year-ago revenues. However, revenues beat the Zacks Consensus Estimate of $4,396.0 million.

On a segment basis, revenues from Consumer Foods decreased 7.4% year over year to $1,779.7 million. The results reflect 7% decrease in volume and 1% negative impact from foreign exchange transactions. However, price/mix helped revenues to rise 1%.

Revenues from the Commercial Foods segment increased 1.0% year over year to $1,627.2 million due to a rise in sales from the Lamb Weston potato business. The Private Brands segment generated $1,029.9 million in revenues, flat compared with the prior-year figure.

For fiscal 2014, ConAgra reported revenues of $17,702.6, up 14.8% year over year. Moreover, annual revenues surpassed the Zacks Consensus Estimate of $17,676 million.

Margins/Costs

In fourth-quarter fiscal 2014, ConAgra reported a 2.0% year-over-year decrease in its cost of goods sold. Selling, general and administrative (SG&A) expenses soared 87.0% and stood at 24.5% as a percentage of revenue. Interest expenses went down 9.1% year over year to $93.0 million.

Balance Sheet/Cash Flow

Exiting fourth-quarter fiscal 2014, ConAgra had cash and cash equivalents of $183.1 million, significantly down from $239.2 million at the previous quarter-end. Senior long-term debt was $8,571.7 million (excluding current portion), up marginally from $8,564.8 million in the preceding quarter.

In fiscal 2014, ConAgra generated cash flow of $1,551.6 million from continuing operating activities, up from $1,408.5 million generated in the previous year. Capital spent on additions of property, plant and equipment totaled $602.4 million, up 32.8% year over year.

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

Outlook

In fiscal 2015, the company with an aim to save $50 million in SG&A expenses, expects all segments to grow from current levels. Moreover, ConAgra anticipates repaying roughly $1.0 billion debt along with operating cash flow generation in the range of $1.6-$1.7 billion. The company is also expected to benefit from the Ralcorp acquisition.

For fiscal 2015, ConAgra expects to witness annual earnings per share growth in the mid-single digit. Further, the company is expected to witness high-single digit annual growth in earnings per share for fiscal 2016 and fiscal 2017. The company also plans to continue paying its annual dividend of $1.00 per share.  

ConAgra‘s current market capitalization is $12.1 billion and it has a Zacks Rank #4 (Sell). Some better-ranked stocks in the food 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), Hain Celestial Group and Inventure Foods hold a Zacks Rank #2 (Buy) each.