ConAgra raises long-term outlook on greater deal savings

Thu Jun 27, 2013 9:56am EDT

(Reuters) - ConAgra Foods Inc (CAG.N) on Thursday posted a quarterly profit slightly ahead of Wall Street estimates and raised its long-term outlook, citing increased cost-savings from its acquisition of Ralcorp Holdings.

ConAgra, whose shares rose 4.7 percent in early trading, closed its $5 billion purchase of Ralcorp in January, making it the leading U.S. manufacturer of "private label" foods, which retailers brand as their own. It also sells branded products, including Chef Boyardee pasta and Hunt's ketchup.

The company said it now expects $300 million of annual savings from the acquired business by the end of fiscal 2017, up from an original estimate of $225 million.

In the fiscal fourth quarter, ended May 26, net income was $192.2 million, or 45 cents per share, compared with a net loss of $86.2 million, or 21 cents per share, a year earlier.

Excluding one-time items, profit was 60 cents per share. On that basis, analysts on average were expecting 59 cents per share, according to Thomson Reuters I/B/E/S.

Net sales jumped 34 percent to $4.59 billion, just shy of analysts' average estimate of $4.60 billion. Sales in the consumer foods segment rose 7 percent, due largely to acquisitions and growth of brands including Peter Pan peanut butter, Hebrew National hot dogs and Marie Callender's meals. Sales in the commercial foods segment rose 4 percent.

POTATO PROBLEM

In the current quarter, ConAgra said earnings would be flat due to significant marketing costs associated with the introduction of new summer products. Subsequent quarters should see profit growth, it said. For the full year, it forecast earnings of $2.40 per share.

That is below analysts' average estimate of $2.48 per share. The company cited two issues at its commercial foods segment, which sells potato and milled grain products to restaurants and other customers. ConAgra expects a hit of 6 cents to 7 cents per share due to a major foodservice customer not renewing a sizeable amount of potato business. It did not identify the customer.

It also sees a hit of 3 cents per share from combining its milling operations with those of Cargill CARG.UL and CHS Inc (CHSCP.O).

In the medium term, ConAgra sees earnings growth of at least 10 percent annually in fiscal years 2015 to 2017 as the savings from the Ralcorp deal materialize.

Longer-term, it sees annual growth of 7 percent to 9 percent for earnings and 3 percent to 4 percent for sales. That is up from its prior growth targets of 6 percent to 8 percent for earnings and 3 percent for sales.

ConAgra shares were up $1.58 to $34.93 in early trading.

(Reporting by Martinne Geller in New York; Editing by John Wallace)