For Conservative Investors:
ConAgra Foods Inc. |  - Co. Spotlights available via RSS feed
| Eating In, Eating Out, It's On The Menu |  
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There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks. | | CAG | $22.80 | Best Features: Broad revenue base; solid balance sheet, cost cutting will save $300 million this year.
Watch Out For: Restaurants serving fewer meals. | 52-wk range | $14-24 | | Beta | 0.8 | | Dividend Yield | 3.5% | | Market Cap. | $10.1B |
February 2, 2010 - ConAgra Foods, Inc. (CAG-NYSE) operates as a food company in North America and internationally. It has two segments: Consumer Foods and Commercial Foods.
The Consumer Foods segment includes branded and private label food products that are sold in various retail and food service channels. It provides various categories of products, such as meals, entrees, condiments, sides, snacks, and desserts across frozen, refrigerated, and shelf-stable temperature classes. Products sell under various brand names, including Angela Mia, Chef Boyardee, EggBeaters, Healthy Choice Fresh Mixerstm, Hebrew National, Hunt's, Manwich, PAM, Peter Pan, Snack Pack, Reddi-wip, Rosarita, Ro*Tel, SwissMiss, Van Camp's, Alexia, Banquet, Healthy Choice, Kid Cuisine, MarieCallender's, ACT II, DAVID, Orville Redenbacher's, Slim Jim, BlueBonnet, La Choy, Libby's, The Max, Parkay, and Wesson.
The Commercial Foods segment provides commercially branded foods and ingredients, sold principally to foodservice, food manufacturing, and industrial customers. Its primary offerings are specialty potato products, milled grain ingredients, various vegetable products, seasonings, blends, and flavors that are sold under brand names such as ConAgra Mills, Lamb Weston, Gilroy Foods & Flavors, and Spicetec. The company was founded in 1919 and is headquartered in Omaha, Nebraska.
We're talking food here, a basic for everyone. As long as there are people, there will be demand for what ConAgra makes. Of course, there's a lot of competition in the food business, but CAG seems to know how to make good money from selling a basic need.
In the fiscal second quarter (ended in November, fiscal year ends in May), earnings were up 54% over the previous quarter, hitting 54 cents a share vs. 37 cents. The improvement came from higher sales and lower costs. The company is on a cost cutting program that is expected to save $300 million in fiscal 2010. Sales were up 3% to $3.173 billion in the November quarter compared $2.961 billion in the first quarter. However, that was down from $3.251 billion in the second quarter of last year. Much of the earnings and sales gains were from the Consumer Foods group.
Things aren't going as well on the Commercial side which accounts for about one-third of CAG's revenues. That's because this division caters to restaurants, and in this difficult economy, consumers aren't eating out as much. While a negative for the Commercial group, this explains why the Consumer Foods division is doing better. People are eating at home more, and CAG's offerings fit right into their menus. There's also a lot of competition in the Commercial Foods world. With slower restaurant sales and an excess of suppliers, the stock reflects investors' concern about when this division will see improvement.
Earnings took a dip in 2008, to $1.06, down from $1.35 in 2007. Last year, they bounced back to $1.52. This year, analysts see $1.75, and next year, $1.90. In the last 2 quarters the company beat analysts' estimates by 11.8% and 10.6% respectively. Revenues were $12.73 billion last year, expected to be $12.47 billion this year, then $12.84 billion next year.
More numbers: Trailing P/E is 13.22 while Forward P/E is 12. Price to sales ratio is .80 while Price to Book is 2.02. Book value is $11.25 per share. Operating margin for the last 12 months was 10.67% while Profit margin was 6.16%. Return on equity was 15.94%. There's $490.20 million in cash which is $1.11 per share. Total debt is $3.48 billion, or about 39% of capital. Current ratio is 1.92. There are 443.41 million shares outstanding with a float of 442 milion shares. Institutions own 72.50% of the stock. There's an 80 cent annual dividend for a yield of 3.5%. Last year's dividend was 77 cents. Value Line rates the Company's Financial Strength at A.
Conservative investors will find a lot to like here: good earnings with better expected, safe dividend (takes 45% of profits), debt in control, plenty of cash. But the company isn't hitting on all cylinders at the moment. The Commercial Foods group feels the economic pinch. Yet with cost cutting and lower raw materials expenses, the company is growing earnings again. Once the Commercial side sees an improved economy, expect earnings estimates to get boosted.
- Company Web site: http://www.conagrafoodscompany.com/ - Ted Allrich |
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