Premier North American food company, ConAgra Foods, Inc. (CAG - Analyst Report), reported results for second quarter of fiscal 2015 (ended Nov 23, 2014). Earnings from continuing operations, adjusted for items impacting comparability, came in at 61 cents per share, down 2% from 62 cents earned in the year-ago quarter. However, results were in line with the Zacks Consensus Estimate.

ConAgra Foods, Inc - Earnings Surprise | FindTheBest

Further, on a GAAP basis, ConAgra’s earnings plummeted 90% year over year to 5 cents per share. The sharp decline was a result of significant non-cash impairment charges.

Revenues

ConAgra generated net revenues of $4,150 million, reflecting a marginal year-over-year fall of 1.7%. The top line also missed the Zacks Consensus Estimate of $4,199 million.

On a segmental basis, Consumer Foods revenues inched down 2% year over year to $1,977.2 million. Volumes and price/mix, each, were down by 1% year over year while foreign currency impact on quarterly sales was nil.

Revenues from the Commercial Foods segment climbed 1.9% year over year to $1,120.8 million, driven by a rise in sales from the Lamb Weston potato business. The Private Brands segment generated $1,052.0 million in revenues, down 4.8% year over year. The volume decline was due to lower production of some items such as cereal, pasta and condiments.

Margins/Costs

ConAgra’s cost of goods sold remained flat at $3,261.5 million, representing 78.6% of total revenues as compared with 77.3% in the year-ago quarter. Selling, general and administrative (SG&A) expenses, as a percentage of revenue, increased 460 basis points (bps) to 17.7%.

Interest expenses dropped 17% year over year to $79.3 million owing to a fall in debt levels.

Balance Sheet/Cash Flow

Exiting second-quarter fiscal 2015, ConAgra had cash and cash equivalents of $121.9 million. Senior long-term debt (excluding current portion) stood at $7,473.1 million, down 12.8% from $8,571.5 million recorded in the preceding quarter.

ConAgra generated cash of $410.6 million from continuing operations for the first six months of fiscal 2015, down 24.1% year over year. Capital spent on additions of property, plant and equipment totaled $202.1 million, down 41% year over year.

During the first six months of fiscal 2015, ConAgra paid dividends worth $211.7 million.

Outlook

For fiscal 2015, ConAgra expects relatively strong performance from its Consumer and Commercial Foods’ segments, which will likely partially offset the decline anticipated from weak results of the Private Brand division. Also, the company expects to benefit from its productivity and efficiency initiatives.  

The company projects its EPS to grow by mid-single digits in fiscal 2015 from $2.17 in fiscal 2014. It also hopes to lower its debt burden by $1 billion at the end of the current fiscal year.

Other Stocks to Consider

The share price of ConAgra declined in pre-market trading, as investors probably expected a healthy earnings beat. With a market capitalization of $15.76 billion, ConAgra currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the industry include Aramark (ARMK - Snapshot Report), The Hain Celestial Group, Inc. (HAIN - Analyst Report) and Sprouts Farmers Market, Inc. (SFM - Snapshot Report). Aramark currently sports a Zacks Rank #1 (Strong Buy), while both Hain Celestial Group and Sprouts Farmers Market carry a Zacks Rank #2 (Buy).