UPDATE 4-ConAgra profit tops expectations; shares up

* Profit 40 cents/share ex-items; Wall St view 36 cents

* Consumer segment profit up 12 percent

* Shares up 5.7 percent in late morning
(Adds company comments, updates stock activity)

By Brad Dorfman

CHICAGO, March 26 (Reuters) - ConAgra Foods Inc (CAG.N)
posted a higher-than-expected quarterly profit on Thursday as
its consumer foods business benefited from price increases and
cost cuts.

The company has sold off some units, such as a commodity
trading and merchandising business, to focus on areas like
consumer foods, which include brands like Healthy Choice frozen
meals and Peter Pan peanut butter.

ConAgra, whose shares rose as much as 6.3 percent on
Thursday, has been trying to turn the consumer segment around by
overhauling product lines and aiming to price products at points
where it can cover commodity cost increases yet still attract
shoppers.

Profit in the consumer segment, which represents 63 percent
of the company's sales, rose 6 percent in the latest quarter,
excluding year-earlier restructuring charges.

Some analysts had been unsure of how well the business would
do. Retailers are aggressively pushing their own brands, and
frozen food competitors like Nestle's (NESN.VX) Lean Cuisine are
spending more to promote their products.

ConAgra has been trying to compete in that business with a
revamp of its Healthy Choice line and new products in other
brands.

"We are not looking to compete in that category primarily
through price," CEO Gary Rodkin told investors on a conference
call.

But the company has made changes to its lower-priced Banquet
frozen foods brand, bringing out some products at $1 to appeal
to consumers seeking lower prices in the recession.

"The consumer business is benefiting from pretty good value
positioning, particularly with Banquet in frozen," Edward Jones
analyst Jack Russo said.

Profit fell to $193.2 million, or 43 cents a share, in the
third quarter ended Feb. 22, from $309.1 million, or 63 cents a
share, a year earlier.

Excluding one-time items and discontinued operations,
earnings rose to 40 cents a share from 34 cents. Analysts on
average had forecast 36 cents.

Sales rose 6.1 percent to $3.13 billion.

A general lift in sales of packaged foods as consumers cook
more at home is more than offsetting competition within
individual categories, said Frost & Sullivan analyst Christopher
Shanahan.

ConAgra said it expected more profit improvement in the
consumer segment in the current quarter as inflation moderates
and new products gain ground.

Still, some analysts viewed the results cautiously, noting
that volume in the consumer segment fell 4 percent.

A significant portion of that drop came from weakness in the
peanut butter segment, which has suffered from a salmonella
outbreak linked to peanut products not related to Peter Pan.
Also, the company shipped less of its ACT II popcorn as it
focused on the higher-margin Orville Redenbacher brand.

Rodkin said he expected volume to improve from quarter to
quarter in 2010.

ConAgra stood by its full-year profit forecast of slightly
more than $1.50 a share, excluding one-time items.

ConAgra shares were up 5.7 percent at $16.45 in late morning
trading on the New York Stock Exchange, off an earlier high at
$16.54. At Wednesday's close, the stock traded at about 9.6
times estimated 2010 earnings, the fourth-lowest multiple of the
26 companies in the Standard & Poor's 1500 Packaged Foods and
Meat index .15GSPFOOD.
(Additional reporting by Martinne Geller; Editing by Steve
Orlofsky, John Wallace and Matthew Lewis)