You don't need a doctorate in economics to know that food prices are rising. It would also be easy to think that rising food prices would be good news for companies that make food products, right?
Wrong. They don't like it either, as inputs such as wheat and corn (think ethanol demand as gasoline prices rise) cost more in your favorite grocery store names.
Take ConAgra Foods (CAG), maker of popular brands such as Chef Boyardee, Healthy Choice, Hebrew National, Hunt's, Orville Redenbacher's, Peter Pan, and Slim Jim, among many others.
Total revenue for the third quarter of its fiscal year ending Feb. 27 rose 4.1 percent on year to $3.15 billion, yet net income was down 6.4 percent at $214.8 million.
"While inflationary pressures continue to build and difficult conditions persist, we expect our performance to continue to benefit from pricing actions under way, strong supply chain cost savings, and other profit-enhancing initiatives," says company CEO Gary Rodkin in an earnings statement.
Despite the problems, diluted earnings per share from continuing operations came to 50 cents, a 2 percent increase over the 49 cents reported in the same period a year ago, and well above analysts' forecasts of average earnings of 46 cents per share, according to Thomson Reuters.
ConAgra on the Prowl?
Furthermore, the company approved a dividend payment of 23 cents per common share to be paid on June 1, 2011.
Dividend investors, however, might wait, as ConAgra is rumored to be in the market to buy.
The company reportedly made a bid to acquire rival Ralcorp (RAH), which confirmed to regulators it had received an unsolicited takeover bid but rejected it without disclosing the identity of the potential suitor.
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