050614 Conagra Outlook Hurt By High Meat Costs

New York - ConAgra Foods Inc. cut its quarterly profit forecast as its packaged meats business was hurt by higher pork and beef costs and a failure to raise prices enough to cover them.

The company also said it was targeting about 1,000 salaried positions as it seeks to cut jobs from its total salaried and hourly work force of 37,000.

Shares of ConAgra (down $1.05 to $24.84, Research), whose brands range from Orville Redenbacher's to Slim Jim, fell 4.6% in afternoon trading on the New York Stock Exchange. The company's stock price fell to a 52-week low of $24 in early trading.

"ConAgra has had execution problems for years now," said CSFB analyst David Nelson, who has an "underperform" rating on the shares. He cut his fourth-quarter estimate to 27 cents per share from 37 cents.

The company previously said it expected fiscal fourth-quarter earnings to "modestly" exceed the third quarter's 30 cents a share, excluding special items.

Analysts, on average, were expecting the company to earn 36 cents a share in the quarter, according some estimates.

ConAgra now expects its packaged meats business to earn 10 cents per share less than forecast. The company had hoped that its strategy of raising prices would improve results as it struggles with rising ingredient costs in the packaged meats business -- which makes Butterball, Healthy Choice and Hebrew National meats, among others.

It said price increases had been "inadequate" and that it has reorganized the division, bringing together the frozen and deli meat businesses.

The layoffs, along with reductions in selling, general and administrative expenses are expected to save ConAgra more than $100 million annually, the company said. ConAgra expects the layoffs will be largely complete by the end of the fiscal first quarter, which ends in August.

"We do not believe these savings will drop to the bottom line," Nelson said in a research note. "Morale can't be high with these job cuts, and probably gets worse before it gets better."

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