ConAgra Shares Look Appetizing For The Long Run

| About: ConAgra Brands, (CAG)
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Food company ConAgra Foods (NYSE:CAG) saw its shares rise Thursday as one of a small number of stocks in positive territory. The company reported positive fourth quarter and full year earnings.

The earnings per share have been adjusted to account for pension changes. Adjusted earnings per share for the fourth quarter were $0.51, which was an increase of 9% from the prior year. The consumer foods segment increased its sales 6% from the prior year. The commercial foods segment saw a 7% increase from the prior year, thanks in large part to the strength of the Lamb Weston brand. Adjusted earnings per share for the year were $1.84. Analysts on Yahoo Finance had forecasted earnings of $1.78.

The company's consumer foods segment made up 63% of the company's fiscal 2012 sales. The segment saw a 6% increase for the year to $2.15 billion in sales. ConAgra's list of brands it owns is extensive and anyone reading this article is familiar with many of them.

· Banquet, Chef Boyardee, David Seeds, Act II, Alexia, Andy Capps, Blue Bonnet, Crunch 'N' Munch, Dennison's, Fiddle Faddle, Fleischmann's, Gulden's, Jiffy Pop, LA Choy, Libby's, Manwich, Parkay, Penrose, Peter Pan, Poppycock, Ranch Style, Ro*Tel, Rosarita, Swiss Miss, Van Camps, Wolf Brand Chili, Egg Beaters, Healthy Choice, Hebrew National, Hunts, Kid Cuisine, Marie Callender's, Orville Redenbacher's, PAM, Reddi-Wip, Slim Jim, Snack Pack, and Wesson.

Along with its consumer products, ConAgra sells its products to restaurants as part of a Foodservice business. Lamb Weston, the company's large potato brand, is the key to the Foodservice segment and has been enjoying success for the company as it grows and receives numerous awards. The company also has a flour brand, Ultigrain, which sells flour and whole wheat flour to restaurants. Spicetec sells flavors and seasonings in the business segment. The commercial segment made up 37% of fiscal 2012 sales for ConAgra. The segment saw sales grow 7% to $1.26 billion, with Lamb Weston seeing double digit sales growth.

Another area of ConAgra's sales is its private label brands. ConAgra works with large national retailers like Kroger (NYSE:KR), Trader Joe's, Costco (NASDAQ:COST), and Target (NYSE:TGT). The company makes products like granola bars, fruit snacks, and pretzels that are sold under the store's brands to consumers.

ConAgra has grown through product innovation to increase sales. Recognizing market trends has helped the company introduce steamable frozen meals, green yogurt, frozen pies, and sweet potato fries through the company's brands. Potato pizza has been a big growing food item in the Korean market and ConAgra has worked closely with its international business segment to expand on this product. The company is taking the potato pizza to pizza chains and restaurants in Asia.

The company also has grown through strategic acquisitions. In the fourth quarter, the company closed on its acquisition of the Del Monte Canada business. This business, purchased for $186 million, brings a significant tomato, vegetable, fruit, and fruit snacks business to ConAgra. The company posted $150 million in sales last year. ConAgra also announced several new acquisitions in the past six months:

· Odom's Tennessee Pride: Acquired this frozen breakfast company for $954 million. The company posted $190 million in sales last year.

· Kangaroo Brands: Acquired a private pita chip company for $48 million. Sales last year for the company were $20 million.

· National Pretzel Company: Salty snacks company was acquired by ConAgra. The company makes food for several grocery stores including Meijer.

Internationally, ConAgra has plenty of room to grow and is one of the biggest reasons I am bullish on the company. The company's commercial products are sold in Europe, Canada, Latin America and Asia. The company's consumer products are available in India, Mexico, Canada, and the Caribbean. The Lamb Weston brand is available in over 100 countries but is still does not have a significant presence in international restaurant chains. ConAgra can expand this brand and increase international sales over the next few years. ConAgra also has majority ownership of India food company Agro Tech Foods. ConAgra recently increased its stake and is using the company to distribute its brands into the Indian market.

Shares of ConAgra also enjoy a high dividend yield with 3.8% as the current payout yield. The company has been raising its dividend every year since 2007. Like many other companies, ConAgra cut its payout during the United States recession. The company has attempted to return profits to shareholders through a rising dividend and share buybacks. The company bought back 9.5 million shares during the last fiscal year. The company spent over $250 million and has $525 million remaining on an authorized share buyback plan.

Analysts on Yahoo Finance call for ConAgra to earn $1.93 in fiscal 2013. ConAgra is calling for earnings per share growth of 6-8% for fiscal 2013. ConAgra's forecasted earnings would come in a range of $1.95-1.99, easily beating Wall Street estimates. I think ConAgra will post earnings per share in the higher range and could even hit $2.00 thanks to growing international sales, strength of the company's commercial business, and several key acquisitions. I think now is the time to get behind this growing food company that offers strong consumer and commercial products.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.