uploads///ConAgra Foods EPS to Decline in Fiscal Q

What Could Cast a Shadow on ConAgra’s EPS in Fiscal 4Q16?

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Jun. 27 2016, Updated 12:05 p.m. ET

Fiscal 4Q16 EPS estimates

In the previous parts, we discussed the estimated revenue for ConAgra Foods (CAG) for fiscal 4Q16 and what could drive its revenue growth. Now, let’s look at analysts’ EPS (earnings per share) estimates and management’s guidance for 2016.

Analysts expect ConAgra’s adjusted EPS to be $0.52 in fiscal 4Q16—compared to 4Q15 EPS of $0.59. It represents a decline of 12%. As you can see in the above chart, the company beat analysts’ expectations in the first and second quarter of fiscal 2016. It missed estimates by 3% in the third quarter. For fiscal 2016, analysts expect its earnings to fall by 5% to $2.08—compared to an EPS of $2.18 in fiscal 2015. However, analysts expect earnings to bounce back in fiscal 2017 and show 16% growth for the full year.

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Management’s expectations

Management expects continued strong fundamentals in the Consumer Foods and Commercial Foods segments. It estimates the fourth quarter EPS to be $0.50. However, it depicts a decrease of 15% compared to the same quarter last year. The expected decline in earnings is due to the extra week in fiscal 2015, the impact of currency translation, higher marketing investments, and higher incentives in fiscal 2016.

The company adjusted its fiscal 2016 diluted EPS guidance in accordance with the expectations for comparable results for continuing operations. In fiscal 2016, the diluted EPS from continuing operations is estimated to be $2.05–$2.07—after adjusting for items impacting comparability.

Earnings estimate for peers

ConAgra’s peers in the packaged food industry include McCormick & Company (MKC), Lancaster Colony (LANC), and Flowers Foods (FLO).

  • McCormick & Company’s EPS for fiscal 2Q16 is expected to fall by 1%.
  • Lancaster Colony’s EPS for fiscal 4Q16 is projected to rise by 12%.
  • Flowers Foods’ EPS for fiscal 2Q16 is expected to rise by 3%.

To gain exposure to ConAgra, you can invest in the Vanguard Consumer Staples ETF (VDC) and the Fidelity MSCI Consumer Staples Index ETF (FSTA). They invest ~2% of their portfolio in ConAgra.

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