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ConAgra Earnings Leap; Forecast Raised

Reuters
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ConAgra Foods posted a 44% jump in quarterly profit, helped by improved operating margins and asset sales, and forecast full-year earnings above analyst expectations, sending the stock upward .

The maker of Healthy Choice meals and Slim Jim beef sticks said net income rose to $219.6 million, or 43 cents a share, in the fiscal second quarter ended Nov. 26, up from $152.5 million, or 29 cents a share, a year earlier.

The latest results included several one-time items, such as a gain on the sale of an oat milling business. It also sold its refrigerated packaged meats business, an interest in a malt joint venture, and its Mama Rosa refrigerated pizza operation.

Excluding one-time items, earnings were 40 cents a share. On that basis, analysts' average forecast was 33 cents, according to Reuters Estimates.

"Rapid expansion of our operating margins is helping build a solid foundation for the future," Gary Rodkin, chief executive officer, said in a statement. "Together with earlier-than-expected completion of key divestitures, this is providing a significant boost to our fiscal 2007 results."

Pablo Zuanic, an analyst with J.P. Morgan, said the earnings were 3 cents a share better than he had expected, largely because of improved margins.

"We remain cautious on valuation, and are skeptical about the retail unit profit margin upside potential," he wrote in a note to clients, reiterating his "underweight" rating on the stock.

ConAgra's quarterly sales rose nearly 3% to $3.09 billion.

The company has been closing factories, selling off brands and spending more on marketing to jump-start its businesses.

Rodkin said the stronger first-half performance will allow it to further increase spending on marketing and innovations.

For the full year, ConAgra forecast earnings of $1.28 to $1.33 a share, excluding one-time items. Analysts, on average, expected $1.26 a share, according to Reuters Estimates.

Where Slim Jims Reign

The shares trade at about 19.5 times analysts' profit forecasts for next year, compared with multiples of 17.7 for H.J. Heinz and 19.1 for Sara Lee.