ConAgra Foods Inc. (CAG), a leading North American food company, reported impressive fiscal second quarter 2013 (ended November 25, 2012) results. The company saw a significant rise in the earnings due to improvements in the Lamb Weston potato operations coupled with improved pricing. ConAgra, hopeful of further improvement in the future, also increased its earnings outlook for fiscal 2013.
Let’s take a brief look at the company’s financials for the fiscal second quarter 2013:
The manufacturer of branded and non-branded food posted a 16.3% increase year over year in the earnings on a continuing basis, adjusted for comparability, to settle down at 57 cents for the quarter. The results surpassed the Zacks Consensus Estimate of 55 cents by 3.6%.
Revenue for the reported quarter improved 8.9% to $3,735.5 million from $3,431.7 million in the year-earlier quarter. Results in the quarter were driven by improved potato operations, moderating inflation and contribution from acquired businesses. Revenue out shined the Zacks Consensus Estimate of $3,691 million by 1.2%.
Agreement/Magnitude of Estimate Revisions
The recent quarter results along with the increase in guidance for fiscal 2013 by the management have triggered an estimate revision for the company in either direction. In the last 7 days, of the 7 estimates for 2013, 5 were revised upwards by the analysts covering the stock. However, out of the 12 estimates for 2014, 5 were revised upwards while 2 were lowered by the analysts in the last 7 days.
For the fiscal third quarter of 2013, from a total of 11 estimates, there were 2 positive revisions.
As for magnitude of estimate revision, in the last 7 days, estimate for the third quarter remained neutral at 55 cents. However, for 2013, estimates increased from $2.06 to $2.09 along with an increase from $2.25 to $2.30 for 2014.
The Zacks Consensus Estimates represents a year-over-year growth of 7.3% for third quarter, 13.6% for 2013 and 10.1% for 2014.
The company seems to have a bright future in the Consumer Foods segment, following the acquisitions it has undertaken so far. The cost reduction activities are in place, leading to the possibility of higher earnings. The pending acquisition of Ralcorp Holdings Inc. is an added advantage, as it will lead to cost synergies in the future. We continue to expect the company to earn high revenues along with an increase in the earnings.
Currently, we maintain a Neutral recommendation on ConAgra Foods Inc. The stock also bears a Zacks #2 (Buy) Rank, while its prime competitors H J HEINZ CO. (HNZ) and BRF Basil Food (BRFS) carry a Zacks #3 (Hold) Rank.
About Zacks Earnings Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/
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