On Feb 28, 2014, we issued an updated research report on ConAgra Foods, Inc. (CAG). The company reported strong results for the second quarter of fiscal 2014. Year over year, earnings increased 9% to 62 cents, while revenues hiked 26.5% to $4.7 billion.
Subsequent to the release of second quarter results, ConAgra revised its outlook for the third quarter and fiscal 2014. The company has lowered its adjusted earnings per share expectations for fiscal 2014 to a range of $2.22 to $2.25 from $2.34 to $2.38 range.
ConAgra has not been able to refurbish the Private Brands segment’s operating profits because of customer service, pricing and sales force coverage issues in the segment within the stipulated timeframe. Additionally, Consumer Foods and Commercial Foods segments are expected to perform below expectations.
However, going forward, ConAgra expects to overcome these difficulties and generate double-digit earnings growth in fiscal 2016 and 2017. Subsequent to fiscal 2017, management expects to witness annual sales growth of 3–4% and earnings per share growth of 7–9%.
ConAgra has also been losing control over price due to the stiff competition in the industry, which may result in market share loss, fall in sales and operating margins.
The reduced guidance led to negative estimate revisions over the past 30 days. As a result, the Zacks Consensus Estimate for fiscal 2014 declined 5.1% and now stands at $2.23 per share. Also, the Zacks Consensus Estimate for fiscal 2015 reduced 8.8% to $2.37 over the same timeframe.
Key Picks from the Sector
ConAgra currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include J&J Snack Foods Corp. (JJSF), Diamond Foods, Inc. (DMND) and The Hain Celestial Group, Inc. (HAIN). All these stocks hold a Zacks Rank #2 (Buy).