Packaged food and beverage provider Sara Lee (NYSE:SLE) reported full year results on Thursday that illustrated it is in a constant state of flux. SLE continues to sell off businesses and redeploy the capital to shareholders in a number of ways. Its remaining businesses may not be that great, but investors could still profit handsomely.

IN PICTURES: 5 "New" Rules For Safe Investing

Full-Year Sales Review
Reported net sales fell 0.8% to $10.8 billion, though this included the impact of divestitures, including selling its hair care business to Procter & Gamble (NYSE:PG) for more than $400 million. It is in the process of unloading its global body care business to Unilever (NYSE:UN) for more than $1.6 billion. According to the company, adjusted net sales, which are meant to look at recurring results, fell 2.8% as volumes declined 1.5%.

North American retail includes the sales of leading meat brands such as Hillshire Farm, Jimmy Dean and Ball Park. Sales in the segment were flat and accounted for approximately 26% of total sales. Fresh bakery sales of bread, muffins, and desserts in the region brought in just under 21% of total sales and experienced a decline in the mid single digits.

The foodservice business caters to restaurant chains such as Darden (NYSE:DRI), hospitals, and other businesses. It weighed in at 17% of sales and reported a 10.5% top-line decline. The international beverage unit sells coffee and tea throughout the world and was the only stand out as it reported 5.2% growth to account for almost 30% of total sales. International bakery sells to retail and businesses, and it also struggled as sales fell 1.3% to account for 7% of sales.

Profit Recap
Net operating income jumped 88.5% to $918 million on cost cutting and dramatically lower impairment and exit charges related to the divestitures of many business lines. However, other charges from discontinuing businesses tempered the net income increase to 38.7%. Net income came in at $527 million, or 73 cents per diluted share. Management estimated adjusted earnings at $1.08 per diluted share.

For the coming year, Sara Lee expects sales between $10.7 billion and $10.9 billion from continuing operations. It projects between 88 cents and 95 cents per share in earnings, with discontinued operations providing another five to seven cents in earnings.

Bottom Line
Sara Lee remains in a perpetual state of flux but should return plenty to shareholders. With proceeds from the multitude of business and asset sales, "the company plans to buy back $2.5 to $3 billion of shares over a three-year period," representing nearly a third of its total stock market capitalization. It also plans to increase the annual dividend of 44 cents, which works out to a current yield of 3%.

A primary concern is that Sara Lee has sold off its most appealing businesses and is left with many meat, bread and food brands that are having a tough time differentiating themselves from rival brands and private label names in the store aisles. That being said, it's not difficult to see more than $20 in per-share value given the share buybacks, increased dividend and sale of the rest of the brands or outright sale of the entire company. (For more, check out Guard Your Portfolio With Defensive Stocks.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  4. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  7. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  8. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  9. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  10. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center