ConAgra Earnings Okay, but Company Still Faces Headwinds

Last week the company maintained its current full-year 2014 EPS guidance of $2.22 to $2.25, which is well below its original guidance of $2.40. And while it did not offer guidance for its 2015 fiscal year, the company said it expects EPS growth at a rate lower than the original double-digit target. The consensus estimates for the fourth quarter call for EPS of $0.64 on revenues of $4.4 billion. For the full year, estimates call for EPS of $2.23 on revenues of $17.79 billion.

The company’s $6.8 billion acquisition of Ralcorp in late 2012 has saddled it with more than $8.5 billion in long-term debt. ConAgra expects to have repaid $950 million in acquisition-related debt by the end of the 2014 fiscal year.

The company’s CEO said:

[T]here are operating challenges that have impacted segment performance and overall EPS growth, but we are encouraged by some pockets of strength. This quarter we posted good sales and market share performances for some of our consumer brands, good international growth for our potato operations, and continued improvement in the operations and organization for our private brands.

ConAgra said on Wednesday that it will close two plants in New York by early 2015, cutting more than 400 employees. The company also expects to close its $4 billion flour mill merger in the second calendar quarter of 2014. Privately held Cargill and CHS Inc. (NASDAQ: CHSCP) will hold 44% and 12%, respectively, of Ardent Mills, while ConAgra will hold the other 44%. Combined sales of what will be the country’s largest milling operation total $4.3 billion.

Shares of ConAgra were up about 1.9% in premarket trading, at $30.16 in a 52-week range $28.09 to $37.28. Thomson Reuters had a consensus analyst price target of around $33.25 before the results were announced.