ConAgra Cuts Q4 Earnings Outlook On Weakness In Consumer Foods, Private Brands

(RTTNews) - Packaged foods company ConAgra Foods Inc. (CAG) on Wednesday lowered its earnings outlook for the fourth quarter of fiscal 2014, citing impairment charges, volume decline in the Consumer Foods segment and weak profits for the Private Brands segment.

Accordingly, for the fourth quarter that ended on May 25, ConAgra now forecasts loss from continuing operations of about $0.76 per share, reflecting significant non-cash impairment charges as well as other items impacting comparability.

According to ConAgra, the revised profit projections as well as expectations for continued profit challenges for some retail brands, primarily Chef Boyardee, resulted in non-cash impairment charges of about $681 million in the fourth quarter.

Excluding items impacting comparability, ConAgra now projects fourth-quarter earnings per share of about $0.55, compared to the prior outlook for adjusted earnings to be slightly in excess of $0.60 per share for the quarter.

On average, eleven analysts polled by Thomson Reuters expect the company to report earnings of $0.62 per share for the quarter. Analysts' estimates typically exclude special items.

ConAgra noted that the lower-than-planned comparable earnings per share outlook for the quarter was largely due to a 7 percent quarterly volume decline for the Consumer Foods segment, as well as weak profits for the Private Brands segment.

Gary Rodkin, CEO of ConAgra Foods, said, "We are disappointed with the Consumer Foods volume performance, which negatively impacted comparable EPS. As we have communicated, we are in the process of improving product mix and promotion strategies in the Consumer Foods segment for better results and greater effectiveness, and we expect our volume performance to improve in fiscal 2015 as a result of this."

Rodkin added that due to the profit challenges in the Private Brands segment, the company was focused on margin improvement initiatives to offset the impact of pricing concessions.

ConAgra projects quarterly operating profit for the Private brands to show a comparable year-over-year decline of about $60 million. The company noted that while the majority of the profit shortfall was driven by pricing concessions, cost challenges associated with integration and business transition also weighed on profit performance.

The company also sees profit from Private Brands segment to be below original plans for the next several years, despite continued expectations for achievement of strong cost-related synergies in line with original plans.

Looking ahead, ConAgra expects fiscal 2015 to be a year of stabilization and recovery with mid-single-digit growth in comparable earnings per share.

The company anticipates comparable earnings per share growth in fiscal 2016 and 2017 will accelerate to a high-single-digit rate as it benefits from stronger underlying operations, generate sizeable productivity and administrative savings, and continued realization of substantial synergies from the Ralcorp transaction.

ConAgra will provide more financial and operating details on the current quarter performance, and future earnings per share outlook, with its regularly scheduled earnings release on June 26, 2014.

The company said it plans to continue it current annual dividend payment of $1.00 per share, and remains committed to a strong dividend policy in the future.

In addition, ConAgra noted that it generated cash from operations of more than $1.5 billion and repaid about $600 million of debt during fiscal 2014, exceeding its targets for the fiscal year. The company said it is confident in its ability to meet its fiscal year 2015 debt repayment goals as well.

In March, ConAgra Foods reported a 95 percent surge in profit for the third quarter from last year on double-digit growth in revenues. Net income attributable to the company for the quarter was $234.3 million or $0.55 per share, up from $120 million or $0.29 per share in the year-ago period. Net sales increased 15 percent to $4.39 billion from $3.83 billion in the prior year.

CAG closed Tuesday's trading at $32.85. In Wednesday's pre-market trades, the stock is down $1.68 or 5.13 percent to $31.15.