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Will Conagra Foods (CAG) Q3 Earnings Top Expectations?

 March 21, 2012 02:51 PM

ConAgra Foods (NYSE: CAG) will announce its third-quarter earnings results on March 22 before the market opens. On February 21, the packaged foods maker backed its 2012 earnings outlook. However,  CAG's  movement after second-quarter results does not provide a positive picture for investors.

Worldwide food inflation has put pressure on company's margins. This is because raw materials cost and fuel charges have increased during the last few months. Additionally, consumers seem to prefer low-cost private labels in order to bring down their spending. This is likely to have some impact on the company's performance.

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In anticipation, analysts have reduced their earnings estimate on ConAgra Foods to 49 cents a share for the third quarter, down from 51 cents a share in the last 30 days. Three months ago, the consensus was 52 cents a share.

In the past four quarters, actual results have been mixed. ConAgra's earnings failed to meet analysts' estimations in two quarters and came in above expectations in the other two quarters.

Currently, Wall Street is predicting the company will deliver earnings of 49 cents a share on revenues of $3.35 billion. This represents earnings downside of two percent despite sales projected to increase 6.10 percent. Last year, the company earned 50 cents a share on revenues of $3.15 billion.

Perhaps foreshadowing CAG's fate, on March 21st, industry peer General Mills (NYSE: GIS) reported third quarter earnings results below expectations. The shortfall was blamed on a fall in gross margins despite sales growth of 13 percent.

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For the second quarter, ConAgra Foods reported net income of $171.8 million, down from $200.9 million, and earnings slipped to 41 cents a share from 45 cents a share in the year-ago quarter. On an adjusted basis, earnings increased to 47 cents a share from 45 cents a share in the previous year.

Net sales were $3.4 billion, 8 percent higher than $3.15 billion in the previous year's second quarter. Street analysts' were expecting the company to report earnings of 43 cents a share on sales of $3.3 billion.

During the last four quarters, ConAgra Foods earned 47 cents a share, 29 cents a share, 47 cents a share and 50 cents a share respectively.

For the fourth quarter, analysts have increased their earnings projections to 54 cents a share from 53 cents a share. However, for fiscal 2012, Street analysts have reduced their EPS estimation to $1.79 a share from $1.81 a share within the last 60 days.

On the other hand, the company has reaffirmed its fiscal 2012 earnings outlook of mid-single digit growth from $1.75 a share reported for fiscal 2011.

As many as nine analysts' are recommending investors to Hold the stock, while three analysts' have rate CAG a Strong Buy. One analyst terms the stock as Underperform. During the 52-week period, the stock ranged between $22.20 and $27.34. Today, shares of the CAG are trading between $26.26 and $26.41.



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