ConAgra Foods (CAG) Tops Q1 EPS by 5c; Sees Q2 EPS Flat Y/Y

September 22, 2015 7:34 AM EDT

(Updated - September 22, 2015 8:17 AM EDT)

ConAgra Foods (NYSE: CAG) reported Q1 EPS of $0.45, $0.05 better than the analyst estimate of $0.40. Revenue for the quarter came in at $2.79 billion versus the consensus estimate of $3.67 billion.

  • Consumer Foods posted strong operating profit growth and more than 250 basis points of comparable margin improvement through a combination of favorable price/mix and increased productivity.
  • Commercial Foods posted good sales and operating profit performance, primarily due to strong volumes, favorable mix, and efficiencies for Lamb Weston.

Outlook

The company will offer more details on fiscal 2016 EPS guidance once it is further along with the process of divesting the private label operations, determining associated SG&A reduction targets, and finalizing investment levels for the remaining segments. The company expects the Consumer Foods and Commercial Foods segments to post modest comparable operating profit growth for the full fiscal year.

With regard to the second quarter of fiscal 2016, the company expects diluted EPS, adjusted for items impacting comparability, to be approximately in line with year-ago comparable amounts. Despite strong fundamentals and expectations for continued margin expansion, comparable operating profits for the Consumer Foods segment in the fiscal second quarter are expected to be negatively impacted by foreign exchange, as well as a planned increase in marketing investment. Profits for the Commercial Foods segment are expected to post an increase in profitability year-over-year in the fiscal second quarter. Expected contribution from the private label operations, which are now in discontinued operations, is included in this guidance. As previously mentioned, results from the private label operations will benefit from the absence of depreciation and amortization.

As announced on June 30, 2015, the company is focused on the divestiture of the private label operations, as well as on creating long-term value by:

  • Aggressively reducing costs, with an increased focus on SG&A and the elimination of stranded costs once the sale of the private label operations is complete,
  • Growing consumer brands (Consumer Foods segment) and Lamb Weston (within the Commercial Foods segment), as well as
  • Balanced capital allocation.

These plans are still being developed, and the company will offer long-term financial expectations about these plans in due course.

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



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