ConAgra Foods, Inc. (CAG): This Food Giant Looks Quite Appetizing

Page 1 of 2

Since July 2012, ConAgra Foods, Inc. (NYSE:CAG) has experienced quite a good gain on the market, rising from $24.30 per share to more than $35 per share. It has also risen by more than 5% in one trading day, after it reported an impressive fourth quarter earnings results. Is ConAgra a good buy after strong fourth quarter earnings? Let’s find out.

Impressive fourth quarter earnings results

ConAgra Foods, Inc.In the fourth quarter, ConAgra Foods, Inc. (NYSE:CAG) generated nearly $4.6 billion in revenue, an impressive growth of 33.7% compared to the revenue of $3.43 billion in the fourth quarter last year. While the Consumer Foods and Commercial Foods segments experienced sales increases of 7% and 3.5%, respectively, the significant growth in revenue was due to the inclusion of $962 million in the revenue of Ralcorp Food and Ralcorp Frozen Bakery Products. Including Ralcorp operating results, the operating profit came in at $554.5 million, 36.1% higher than the operating profit of $407.5 million in the fourth quarter last year. The net income was $192.2 million, or $0.45 per share, a significant improvement compared to the loss of $86.2 million, or a loss of $0.21 per share last year.

High leverage with negative tangible book value

The company’s CEO Gary Rodkin felt bullish about the recent operating results, he said: We are pleased to have driven a 17% increase in comparable EPS for fiscal 2013, and to have posted comparable year-over-year Consumer Foods volume growth in the fiscal fourth quarter as planned.” After Ralcorp’s acquisition, ConAgra Foods, Inc. (NYSE:CAG) increased its leverage level significantly. As of March 2013, it had $5.36 billion in equity, $183.9 million in cash and nearly $8.7 billion in senior long-term debt. It also booked $185 million in notes payable and $517.9 million in current installments of long-term debt. Thus, the net debt amounted to more than $9.2 billion. The goodwill, trademarks & intangibles also rose significantly. In March 2013, it had more than $8.45 billion in goodwill and more than $3.4 billion in brands and trademarks and other intangibles. Consequently, ConAgra Foods, Inc. (NYSE:CAG) had a negative tangible book value of nearly $(6.5) billion.

Relatively cheap compared to its peers

What I like about the company is its relatively low earnings valuation. At $35 per share, ConAgra Foods, Inc. (NYSE:CAG) is worth $14 billion on the market. The market values ConAgra at nearly 12.8 times its forward earnings. Compared to its peers Kraft Foods Group Inc (NASDAQ:KRFT) and Mondelez International Inc (NASDAQ:MDLZ), it has the lowest valuation among the three. Kraft Foods is trading at $55.30 per share, with a total market cap of $32.9 billion. The market values Kraft Foods as the most expensive, at 17.4 times its forward earnings. Mondelez also has a higher valuation. At $29.10 per share, Mondelez is worth $52 billion on the market. It is valued at more than 16.9 times its forward earnings.

Kraft Foods is the ex-parent of Mondelez. The spinoff of Mondelez International Inc (NASDAQ:MDLZ) separates the two businesses with different focuses. While Kraft Foods Group Inc (NASDAQ:KRFT) concentrates on the mature North American grocery business, Mondelez’s main battlefield is emerging markets including Brazil, China and India. Consequently, Kraft Foods pays a higher dividend yield at 3.7%, but it is the slower growth business. Mondelez, with 45.4% of the total revenue coming from developing markets, has a much higher growth potential, but it offers a lower dividend yield at 1.8%. Like Kraft Foods, ConAgra’s dividend yield is also quite juicy, at around 3%.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!