ConAgra Foods Inc (CAG.N) lowered its profit expectations for the current quarter as higher prices for packaged food curb demand.
Shares of the maker of Banquet frozen meals, Chef Boyardee pasta and Hebrew National hot dogs were down 1 percent at midday on Thursday.
Like all food companies, ConAgra has been hurt by soaring costs for raw materials from grain to meat to fuel. In an effort to pass some of those costs on to consumers, ConAgra has raised prices on many of its goods, which has hurt sales volume.
"Conditions have been difficult across the industry due to high inflation and soft volumes for retail consumer food brands," said ConAgra Chief Executive Gary Rodkin in a statement.
Business conditions remain difficult and have softened the company's near-term earnings outlook, ConAgra added, saying it expected "modest" earnings growth in the fourth quarter.
"We have downwardly revised our outlook for Q4," Chris Klinefelter, ConAgra's vice president of investor relations, told analysts on a conference call. He said "modest" probably meant growth in the single-digit range.
That would lead ConAgra to post low single-digit growth for the full year, which is still within the company's stated goal of low- to mid-single digit growth.
PRICE INCREASES HELP REVENUE, HURT VOLUME
In the fiscal third quarter ended on February 26, ConAgra's net income rose to $271.6 million, or 65 cents per share, from $214.8 million or 50 cents per share a year earlier.
Excluding items, earnings were 51 cents per share, topping analysts' average estimate of 49 cents per share, according to Thomson Reuters I/B/E/S.
Its sales rose 7 percent to $3.37 billion. Analysts had expected $3.35 billion.
In the consumer foods segment, which accounts for nearly two-thirds of sales and supplies stores and foodservice channels, sales rose 4 percent, helped by recent acquisitions. A 5 percentage-point decline in sales volume muffled the benefit of price increases.
In the commercial foods segment, which sells potato products, seasonings and milled grain products to food service and other commercial channels, sales jumped 14 percent. ConAgra cited higher sales volume for its Lamb Weston potatoes and price increases.
ConAgra shares were down 1 percent at $26.10 on the New York Stock Exchange at midday.
(Reporting By Martinne Geller in New York; Editing by Maureen Bavdek, Dave Zimmerman and Matthew Lewis)