ConAgra Foods (CAG) Reports In-Line Q4 EPS; Plans to Exit Private Brands Operations

June 30, 2015 7:31 AM EDT

ConAgra Foods (NYSE: CAG) reported Q4 EPS of $0.59, in-line with the analyst estimate of $0.59. Revenue for the quarter came in at $4.11 billion versus the consensus estimate of $4.14 billion.

  • Consumer Foods and Commercial Foods posted operating profit growth after adjusting for items impacting comparability, and including the benefit of the extra week.
  • Private Brands posted an operating profit decline after adjusting for items impacting comparability, and including the benefit of the extra week.
  • The company repaid approximately $1.1 billion of debt in fiscal 2015, resulting in cumulative debt reduction of approximately $2.1 billion since the completion of the Ralcorp transaction, which exceeded the $2.0 billion goal.
  • The company plans to exit the Private Brands operations.
  • The company’s new plans for creating long-term value center on a more aggressive approach to cost reduction, growing consumer brands (Consumer Foods segment) and Lamb Weston (within the Commercial Foods segment), as well as balanced capital allocation. Details to be shared at an investor event later this year.

Outlook

The company will offer details on full-year fiscal 2016 expected EPS, as well as long-term financial guidance, at an investor event likely to be scheduled for the fall of 2015. This event will be scheduled after the company completes its assessment of strategic alternatives for the Private Brands operations, and determines SG&A reduction targets and investment needs for the remainder of the company.

With regard to first quarter of fiscal 2016, which the company expects to be unaffected by the outcome of the review of strategic alternatives for the Private Brands operations, the company expects EPS, adjusted for items impacting comparability, to be roughly in line with comparable year-ago amounts.

With regard to plans for the rest of the company, the company’s new focus will be on:

  • Productivity, notably within SG&A, but also in terms of supply chain and trade spending. The company sees significant margin potential through these initiatives.
  • Driving profitable growth in the Consumer Foods segment and at Lamb Weston potato operations (within the Commercial Foods segment). This will involve further portfolio segmentation, and investing behind the highest-potential categories in a disciplined manner. Investment may include marketing, infrastructure, innovation, and acquired businesses. The company expects some additional divestitures as it continues to refine the asset mix.
  • Balanced capital allocation that includes growing the dividend over time, increasing share repurchases, and having an investment-grade balance sheet.

Financial expectations and operating details regarding the above will be shared as part of the investor event later this year.

For earnings history and earnings-related data on ConAgra Foods (CAG) click here.



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