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Con Agra's Mild Indigestion
Packaged food giant Con Agra (NYSE:CAG) turned in a poor fourth-quarter and full-year earnings results.Troubled by poor performance in its commercial foods division, the company also suffered from an uneventful potato crop and had charges that further dampened results.
IN PICTURES: 10 Ways To Cut Your Food Costs
A Struggling Quarter; A Hard Year
Although the quarter's results look worse for having one less week this year, net income fell from $174.7 million in the same quarter last year to $90.6 million this year. Earnings per share was 20 cents from 39 cents. Revenue was off from $3.224 billion in last year's quarter to $3.06 billion in this year's. The quarter's problems were the same as those of the entire year, with a soft restaurant business pushing down the company's commercial sales, though its consumer business continued to be the relative strong point.
Con Agra's full-year saw revenue of $12.08 billion, down from $12.442 billion, with net income falling to $725.8 million from $978.4 million, EPS of $1.62, down from $2.15. These results are the fourth-quarter writ large.
Other Food Companies
Other food companies have turned in mixed results. Food conglomerate Kraft (NYSE:KFT) pulled out of the recessionary funk for food packagers with more thrust. Its first quarter revenues were up to $11.3 billion from $8.979 billion a year ago. Its Q1 earnings rose to $1.17 a share from 45 cents in the previous year's quarter. Hormel (NYSE:HRL) has increased its sales in the first two quarters this year, though its earnings was roughly flat in its recent quarter. Campbell Soup (NYSE:CPB) has been making earnings progress even with relatively flat sales, though it too saw net income flattened out in its most recent quarter. Heinz (NYSE:HNZ) had a little different pattern, with sales up but earnings slightly down. All in all, the food packagers are finding the sluggishness of the recession persistent, though Kraft appears to be making the most headway.
Which Way for Con Agra?
Industry observers are surprisingly positive on how to read Con Agra's progress. Ned Douthat, Chief Equity Analyst at Ockham Research, feels the Con Agra results are not as negative as they appear. Douthat feels the stock is historically undervalued. Other observers have pointed out that EPS from continuing operations has risen 23%. Operating cash flow increased from $945 million to $1.4 billion, with $950 million cash on the balance sheet, so cost savings are effective. The company is expected to grow its net income by 8-10% this year. All these developments have occurred in the face of a tough food service industry climate.
The Bottom Line
Despite some of the relative positives underlying Con Agra, I'm not high on the stock right now. While it pays a nice dividend currently yielding 3.3% and trades at a reasonable 13.75 P/E with a forward P/E of 11.61, we need to see more progress in sales and earnings. The food service industry, which is still showing the face of the recession, needs to pick up. (Learn more, see: Recession: What Does It Mean To Investors?)
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IN PICTURES: 10 Ways To Cut Your Food Costs
A Struggling Quarter; A Hard Year
Although the quarter's results look worse for having one less week this year, net income fell from $174.7 million in the same quarter last year to $90.6 million this year. Earnings per share was 20 cents from 39 cents. Revenue was off from $3.224 billion in last year's quarter to $3.06 billion in this year's. The quarter's problems were the same as those of the entire year, with a soft restaurant business pushing down the company's commercial sales, though its consumer business continued to be the relative strong point.
Con Agra's full-year saw revenue of $12.08 billion, down from $12.442 billion, with net income falling to $725.8 million from $978.4 million, EPS of $1.62, down from $2.15. These results are the fourth-quarter writ large.
Other food companies have turned in mixed results. Food conglomerate Kraft (NYSE:KFT) pulled out of the recessionary funk for food packagers with more thrust. Its first quarter revenues were up to $11.3 billion from $8.979 billion a year ago. Its Q1 earnings rose to $1.17 a share from 45 cents in the previous year's quarter. Hormel (NYSE:HRL) has increased its sales in the first two quarters this year, though its earnings was roughly flat in its recent quarter. Campbell Soup (NYSE:CPB) has been making earnings progress even with relatively flat sales, though it too saw net income flattened out in its most recent quarter. Heinz (NYSE:HNZ) had a little different pattern, with sales up but earnings slightly down. All in all, the food packagers are finding the sluggishness of the recession persistent, though Kraft appears to be making the most headway.
Which Way for Con Agra?
Industry observers are surprisingly positive on how to read Con Agra's progress. Ned Douthat, Chief Equity Analyst at Ockham Research, feels the Con Agra results are not as negative as they appear. Douthat feels the stock is historically undervalued. Other observers have pointed out that EPS from continuing operations has risen 23%. Operating cash flow increased from $945 million to $1.4 billion, with $950 million cash on the balance sheet, so cost savings are effective. The company is expected to grow its net income by 8-10% this year. All these developments have occurred in the face of a tough food service industry climate.
The Bottom Line
Despite some of the relative positives underlying Con Agra, I'm not high on the stock right now. While it pays a nice dividend currently yielding 3.3% and trades at a reasonable 13.75 P/E with a forward P/E of 11.61, we need to see more progress in sales and earnings. The food service industry, which is still showing the face of the recession, needs to pick up. (Learn more, see: Recession: What Does It Mean To Investors?)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
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