More important, though, I enjoy dissecting the long-term implications of the transaction not only between the two companies involved, but its potential ripple effect impacting upon rivals that are on the outside looking in.
In the case of ConAgra (CAG - Get Report), there were more than enough reasons to cheer the company's $5 billion deal for Ralcorp. It was during a period of turbulence for the entire packaged-food industry, not to mention inflation had caused struggles for the likes of General Mills (GIS) and Kellogg (K). This was a deal that I felt ConAgra needed to make -- even though I questioned the price tag, which included a 28% premium.
So far the results are paying off handsomely as ConAgra demonstrated in its recent fiscal fourth-quarter report. But I wouldn't get too excited about the gaudy growth numbers just yet. This was expected. In our last discussion, I said the following:"Despite ConAgra's consistent fundamental improvements, the company should look much better once Ralcorp is fully integrated into the mix. To that end, investors should expect a leaner and more valuable company in the long term, provided that management is able to remove costs associated with Ralcorp, while improving asset utilization." So far things are going according to plan. In some instances, ConAgra has exceeded expectations. Revenue was the biggest outlier in this recent quarter, growing 35% year over year. If this seems odd, it is. Or at least it should be after the company posted revenue growth of 13% in the previous quarter.