ConAgra (NYSE:CAG) Earnings Plunge 12 Percent

The first fiscal quarter of ConAgra Foods Inc. (NYSE:CAG) wasn't a good one, as the earnings of the company dropped 12 percent, with ConAgra citing tough competition, a weak economy, concerns over inflation and weak sales at the retail level.

Earnings for the quarter came in at $146.4 million, or 33 cents a share. That was down from $165.9 million, or 37 cents a share learning the same period last year.

Revenue also dropped in the quarter, although not dramatically, falling to $2.82 billion, or 2 percent. That was down from $2.89 billion last year. Analysts had been looking for revenue of $2.98 billion.

Chief Executive Office Gary Rodkin said, "Our fiscal first-quarter margins and EPS were lower than planned because of an intense promotional environment and inflation that outpaced cost savings. There were, however, several signs of strength in terms of market share and brand sales, demonstrating progress and growth potential for important parts of our portfolio."

The need to discount to move product was the primary reason for the poor performance, as the largest division of the company, the consumer food unit, dropped 2 percent in revenue to $1.82 billion.

Full year guidance was also lowered by ConAgra, from the former 8 percent to 10 percent growth to 5 percent to 7 percent growth. For the year that would be an earnings range of $1.83 to $1.86 a share.

Citigroup (NYSE:C) Lowers Price Target on ConAgra Foods (NYSE:CAG)

ConAgra Foods (NYSE:CAG) had its price target lowered by Citigroup Inc. (NYSE:C), as the financial giant said they see slower because because of the weakening economy.

The price target was lowered from $31 to $30 by Citigroup, according to a note to clients.

Citi maintained their "Buy" on ConAgra, although they did lower their earnings per share estimate going forward.

Investors shrugged off the news, as ConAgra rose to $22.01, gaining $0.16, or 0.73 percent, as of 1:50 PM EDT.

ConAgra Foods (NYSE:CAG) Fourth-Quarter Profits Plunge

ConAgra Foods (NYSE:CAG) fourth-quarter profits plummeted, dropping 48 percent on declining commercial food sales.

Earnings dropped to $123 million, or 27 cents a share, while after excluding items, profits came to 39 cents a share, down from the 40 cents the street was looking for.

Revenue also plunged by 5 percent, largely on declining sales to restaurants, as people continue to stay home and eat cheaper.

Operating profits in the commercial-foods division, which supplies restaurants, fell 26 percent.

Guidance from the company has them increasing earnings per share by 8 percent to 10 percent from this year. That would be on the lower end or close to equal to the $1.91 analysts are estimating. Their guidance comes to $1.88 to $1.91 a share.

ConAgra's strategy going forward is to focus more on higher-margin branded foods and move shrink their reliance on commercial food sales, which is a low-margin commodity food business.

ConAgra (NYSE:CAG) Selling Fresh Vegetable Segment to Olam International

In what ConAgra (NYSE:CAG) CEO Gary Rodkin says is a move to shed non-core assets of the company, ConAgra is selling a portion of its Gilroy Foods & Flavors division to Olam International for $250 million.

While divesting of the fresh vegetable part of the unit, ConAgra will retain the seasoning blends and flavors segment of Gilroy Foods.

The part of the business being sold accounted for close to $300 million in revenue for the 2010 fiscal year of ConAgra, the company said in a press release.

That includes brands like Redi-Made, Controlled Moisture and GardenFrost.

Olam is a food processor based in Singapore.

ConAgra Foods (NYSE:CAG) Maintains Earnings Estimate

ConAgra Foods (NYSE:CAG) reiterated its earnings projection of about $1.73 a share for 2010, still up from 2009's performance, but down from analysts' expectations.

Annual revenue growth guidance stands at from between 3 percent to 4 percent, with an eight to ten percent growth rate a share for its net income for the long term.

Analysts are looking for net income to reach $1.75 a share on revenue of $12.4 billion for 2010.

Original estimates for the year were for $1.70 a share for earnings, which was revised in December to $1.73, and reaffirmed today.

Annual earnings in 2009 was $1.52 a share on $12.7 billion in revenue.

Hedge Fund Buys another Grain Business

ConAgra CEO Gary Rodkin

A number of concerns has led ConAgra Foods Inc. (NYSE: CAG) to sell off their grain business to hedge fund Ospraie.

One of the concerns came from ConAgra shareholders, who have been expressing concerns over the long term impact the extremely volatile trading business would have on ConAgra.

ConAgra CEO Gary Rodkin said the sale will help the company return its focus to its core food operations, while addressing shareholder anxiety over the trading business.

While the commodity trading unit was very profitable for ConAgra during the commodity boom, the tremendous swings in the futures market made it a huge unknown at any one time for the business and its shareholders.

A related problem was the availability of credit to raise money to back margin calls, making it harder to protect their positions.

One grains trader approved of the deal saying about ConAgra, "They can control risk better now that they're just in the food business."

This is the second time this year a grain business has been acquired by a hedge fund, as earlier in the year Whitebox Advisors LLC bought a grain elevator in Minnesota from Cargill Inc.

Some thing this is the beginning of a trend that has opened the door to a flood of these types of deals.

The reason the hedge funds are going this way is to get a better sense of what the physical markets are really doing, so they can make more informed decisions on their trades.