* Q2 EPS ex-items 52 cents; Wall Street view 47 cents
* Sales fall 2.4 pct to $3.17 billion, missing estimates
* Raises fiscal 2010 EPS forecast
* Shares down 0.4 pct
(Adds conference call, analyst comments, background)
By Dhanya Skariachan
NEW YORK, Dec 21 ConAgra Foods Inc (CAG.N)
posted higher-than-expected quarterly profit on lower commodity
costs and strength in its consumer foods business, but warned
that costs could rise modestly in the coming months.
The food maker's shares initially rose 4.4 percent to a
year-high of $23.13, but they later gave up those gains and
were slightly lower in afternoon trade.
"We expect low single-digit inflation for the fiscal year
in consumer foods, excluding the pass-through items. So that
means a bit of headwind but nothing like we experienced last
fiscal year or the year before," Chief Executive Gary Rodkin
The maker of Chef Boy-Ar-Dee pasta and Banquet frozen
dinners raised its full-year profit forecast for the second
time in six months, citing increased marketing and consumers
eating at home more often in the tough economy.
Its consumer segment has also benefited from ConAgra's
efforts to overhaul product lines and better price products to
cover commodity costs yet still attract shoppers.
The company said its "Obviously Delicious and Secretly
Nutritious" marketing campaign, highlighting that each serving
of Chef Boy-Ar-Dee beef ravioli contains a full serving of
vegetables, particularly resonated with customers.
Net profit increased to $239.7 million, or 54 cents a
share, in the second quarter ended Nov. 29, from $168.1
million, or 37 cents a share, a year earlier.
Excluding one-time items, profit was 52 cents a share,
beating the analysts' average forecast of 47 cents, according
to Thomson Reuters I/B/E/S.
Profit at its consumer foods unit rose 31.4 percent, while
volumes grew 2 percent.
Total sales fell 2.4 percent to $3.17 billion, shy of Wall
Street expectations for $3.33 billion.
ConAgra shares were off 9 cents at $22.07 in afternoon
trade on the New York Stock Exchange.
BRAND STRENGTH QUESTIONED
ConAgra, which spent 25 percent more on marketing in the
quarter than a year earlier, said its three big frozen food
brands -- Banquet, Healthy Choice and Marie Callender's -- took
market share in the period.
Some analysts have cautioned that the company has bought
some of its volume gains with promotions and that its brands
are especially vulnerable to private-label competition.
Edward Jones analyst Jack Russo said ConAgra's sales
progress was a little bit better than its peers, but said there
were concerns surrounding the strength of its brands.
"A lot of their brands within their categories are not
leading brands ... but second or third tier," Russo said.
"Perhaps there is some concern that the strength of those types
of brands ... is not going to last as we head into 2010."
The company raised concerns about the pressures on U.S.
consumers but said it still sees robust demand for its products
in the back half of its fiscal year.
ConAgra has sold off units like a commodity trading
business to focus more on branded consumer foods, but it said
it was open to making acquisitions that made strategic sense.
It said full-year earnings would approach $1.73 a share
excluding one-time items. In September it raised that forecast
to about $1.70 a share.
The company now expects insurance recovery related to an
explosion at a plant, estimated at about 5 cents a share, to be
recognized in fiscal 2011 instead of fiscal 2010.
(Reporting by Dhanya Skariachan, editing by Gerald E.
McCormick, Lisa Von Ahn and John Wallace)