Food products company ConAgra Foods Inc. (CAG) is scheduled to release its fourth-quarter fiscal 2014 (ended May 26, 2014) results before the opening bell on Jun 26. The company had delivered a positive earnings surprise of 3.33% in the preceding quarter. Let’s see how things are shaping up prior to this announcement.
Factors to Consider
ConAgra reported improved year-over-year results in the third quarter of fiscal 2014. Adjusted earnings increased to 62 cents per share from 55 cents in the year-ago quarter. Revenues rose 14.5% year over year to $4.4 billion on the back of increased sales of Private Brands.
In the to-be-reported quarter, the Consumer Foods segment is expected to record 7% fall in volumes, which will lead to lower revenues. Additionally, the Private Brands segment is expected to yield lower profits, negatively impacting total earnings. ConAgra expects earnings per share to be 55 cents per share for fiscal 2014, from the prior projection of 60 cents. The company expects to repay $550 million of debt, whereas operating cash flow generation is estimated at $1.4 billion. It also plans to continue the annual dividend payout of $1.00 per share.
Management is planning to take proactive measures like improving product mix and promotion strategies in order to enhance volumes in the Consumer Foods segment.
Our proven model shows that ConAgra is less likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as we see below.
Zacks ESP: ConAgra’s Most Accurate estimate stands at 55 cents, while the Zacks Consensus is pegged slightly higher at 57 cents. Hence, the Earnings ESP is -3.51%.
Zacks Rank: ConAgra has a Zacks Rank #4 (Sell) which lowers the predictive power of ESP. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
ConAgra witnessed downward movement of estimates in the past seven days for the upcoming quarter as well as for fiscal 2014.
Other Stocks to Consider
Here are some other companies in the industry that investors may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:
The Hain Celestial Group, Inc. (HAIN) has Earnings ESP of +1.12% and a Zacks Rank #2 (Buy).
Campbell Soup Company (CPB) has Earnings ESP of +2.04% and a Zacks Rank #3 (Hold).
Post Holdings, Inc. (POST) has Earnings ESP of +4.00% and a Zacks Rank #3.