ConAgra Foods Inc. (CAG) reported encouraging results for the second quarter of 2010, with earnings of 52 cents per share. Earnings were well above the Zacks Consensus Estimate of 47 cents and were up 44.7% year over year.

Total revenue for ConAgra declined 2.4% to $3.1 billion as the Commercial Foods segment declined 11.4%. This was partially offset by a 3.0% increase in the Consumer Foods segment.

The Consumer Foods segment posted sales of $2.1 billion, up 3.0% year over year. The top line was negatively impacted by lower sales of Slim Jim products. However, unit volumes increased 2% year-over-year.

Sales in the Commercial Foods segment were $1.1 billion, down 11.4% from the second quarter of fiscal 2009. The decline was the result of lower flour prices due to lower underlying wheat costs.
Gross margin for the quarter expanded 585 basis points (bps) to 27.0% versus 21.1% in the prior-year quarter. The operating margin expanded 334 bps to 11.2% from 7.8% in the prior-year quarter.

For the quarter, capital expenditures from continuing operations for property, plant and equipment were $123 million, compared with $115 million in the year-ago period. Depreciation and amortization expense from continuing operations was approximately $83 million for the quarter, compared to $79 million in the year-ago period.

Based on the performance of the second quarter, management raised its earnings guidance for fiscal 2010. Annual earnings from continuing operations, excluding one-time items, are expected at $1.73 per share. The previous expectation was $1.70.

Zacks Investment Research

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