ConAgra Guides to High End

It believes costs tied to the peanut butter recall are under control.
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ConAgra (CAG) - Get Report beat third-quarter earnings targets and guided to the high end of its estimated profit range for the year.

The Omaha, Neb., food packager made $187 million, or 37 cents a share, from continuing operations for the quarter ended Feb. 25. That's up from the year-ago $98 million, or 19 cents a share. Sales rose 2% from a year ago to $2.92 billion.

Analysts surveyed by Thomson Financial were looking for a 35-cent profit on sales of $2.78 billion.

"I congratulate our team on a strong EPS performance, particularly in light of the fact that we were able to offset significant costs associated with the peanut butter recall, and still increase our marketing investment," said CEO Gary Rodkin. "We clearly are making progress with our ongoing initiatives to reduce operating costs and expand margins, and we are improving execution. Given our operating progress to date, as well as trading profits that have been stronger than planned so far this fiscal year, we are comfortable that EPS will be toward the high end of our EPS guidance range for fiscal 2007."

The company said it expects earnings for the year to come in at the high end of its forecast $1.28-to-$1.33-a-share range. Analysts are looking for $1.34 a share.

ConAgra said the peanut butter recall, tied to salmonella contamination, hit the third quarter by 6 cents a share, but that most of the costs tied to that problem have already been recognized.

The company currently estimates that the cost of the peanut butter recall will approximate $50 million to $60 million, largely reflecting the costs associated with customer and consumer product returns, inventory write-offs and projected legal costs. Of this amount, $48 million was recognized in the third quarter; most of the remainder is expected to be recognized in the fourth quarter of fiscal 2007.