RPM International Inc. (RPM), ConAgra Foods, Inc. (CAG): Three Earnings Reports That Caught My Attention Last Week

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As we near the kick-off of earnings season in the second quarter, I can’t help but point out that the majority of earnings reports we’ve covered over the past year have been better than expected. With so many companies reporting during the weeks that comprise earnings season, it’s easy for some earnings reports to fall through the cracks.

RPM International Inc. (NYSE:RPM)

Each week for the past year, I’ve taken a look at three companies that could be worth further research after either beating or missing their profit expectations. Today, we’ll take a gander at three more companies that reported earnings last week. They may have slid under your radar, but they deserve a look.

Company Consensus EPS Reported EPS Surprise
RPM International Inc. (NYSE:RPM) $0.06 $0.07 17%
ConAgra Foods, Inc. (NYSE:CAG) $0.56 $0.55 (2%)
CONN’S, Inc. (NASDAQ:CONN) $0.56 $0.54 (4%)

Source: Yahoo! Finance.

RPM International
With the housing sector on the mend, I fully expected positive results from sealant, coating, and building materials manufacturer RPM International — and its third-quarter results didn’t disappoint. RPM International Inc. (NYSE:RPM)’s net sales increased 9% to $843.7 million as its adjusted EPS jumped 40% from the year-ago period. Responsible for the sales boost was a mix of benefits ranging from acquisitions, which tacked on 4.5% growth; positive foreign exchange rates, which added 1.2%; and organic growth of 1.6%.

Not all investors were pleased, though, as RPM International Inc. (NYSE:RPM)’s report also featured a sizable one-time charge of $68.8 million that pushed the company’s GAAP results into the red. The company’s building solutions group had an ongoing lawsuit pending with the Department of Justice and the U.S. General Services Administration involving its pricing of certain products sold to the government.

However, with this lawsuit now in the rearview mirror and both the consumer and industrial sectors seeing a turnaround, RPM International Inc. (NYSE:RPM)’s outlook appears bright. European troubles will continue to weigh on margins, so temper those expectations a bit, but consider RPM International Inc. (NYSE:RPM)’s 39-year streak of raising its dividend well intact.

Consumer and commercial food producer ConAgra Foods, Inc. (NYSE:CAG) has risen about 50% since August. Needless to say, following the early closure of its acquisition of Ralcorp, expectations for its third-quarter report were high. Unfortunately, unlike the results from RPM above, they left me (and some investors) highly disappointed.

ConAgra Foods, Inc. (NYSE:CAG)’s consumer foods segment, which accounts for 60% of total sales, delivered 7% sales growth, but that was entirely based on 7% acquisitions growth and a 3% boost in prices. The actual volume purchased by consumers dipped 3% and would indicate that consumers are being more particular with their purchasing habits. If you think this is a sectorwide problem, it’s not. Kellogg Company (NYSE:K)‘s purchase of the Pringles brand from The Procter & Gamble Company (NYSE:PG) in 2012 helped push results higher, but Kellogg still delivered 2.5% organic growth helped out by growth in Latin America.

ConAgra Foods, Inc. (NYSE:CAG)’s valuation and volume struggles could become a serious concern for investors if the company isn’t careful. Volume declines in both the consumer and commercial segments point to global, not just domestic, weakness, and a strategy that involves boosting prices and its marketing budget will only serve to tighten ConAgra Foods, Inc. (NYSE:CAG)’s already pressured margins — especially if its higher prices send consumers to its competitors. I believe there’s a lot of profit-miss potential baked into ConAgra Foods, Inc. (NYSE:CAG)’s EPS figures this year, and I’d highly suggest reevaluating its growth strategy before considering your purchase.

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