By Lisa Baertlein
LOS ANGELES (Reuters) - ConAgra Foods (CAG) warned on Tuesday it would miss its first-quarter earnings forecast after costs for commodities like corn and crude oil eroded profits on sales of cooking oil, Banquet frozen dinners and popcorn, prompting shares to fall more than 4 percent.
But analysts saw ConAgra's problems more of its own making than a prelude to problems throughout the food industry, which has managed to pass on higher costs to consumers for most of the current U.S. downturn.
Omaha, Nebraska-based ConAgra's products lag category leaders and are forced to compete with aggressively priced store brands -- making it challenging for ConAgra to pass along higher costs to consumers.
The company said earnings excluding items are expected to be "slightly below" its previously issued outlook calling for a quarterly profit of 26 cents to 28 cents per share.
"The projections they were putting out for the consumer segment were a bit of a stretch. This doesn't surprise me," said Morningstar analyst Gregg Warren.
ConAgra's consumer foods segment had high single-digit sales growth on essentially flat volume, but inflation was higher than expected -- resulting in an operating profit decline from the year-ago first quarter, the company said in a statement.
A company spokeswoman said inflation rose more than anticipated on a variety of commodities it uses.
Edward Jones analyst Matt Arnold said some rivals -- particularly Cheerios maker General Mills Inc (GIS) -- have seen sales volumes increase even after they raised prices.
"There are going to be winners and losers in this kind of environment where all of the companies are feeling pressure," Arnold said.
"They (ConAgra) just don't have category leadership. They haven't done enough with innovation to justify the higher prices that are needed right now to offset higher input costs," he said.
ConAgra said it does not expect any material change in its fiscal 2009 outlook, but it is determining whether the first-quarter results would cause a downward revision to the low end of the expected range for full-year earnings.
Fiscal first-quarter earnings from continuing operations will include a net loss of 5 cents to 6 cents related to derivatives used to hedge costs.
The company also canceled its planned appearance at the Lehman Brothers Back-to-School Conference in Boston on Wednesday, where it planned to give investors a business update.
Morningstar analyst Warren said it appeared that derivatives may have played a bigger role in the profit warning than operational issues did.
ConAgra is slated to report first-quarter financial results on September 18.
Shares in the company fell 4.8 percent to $20.44 after closing at $21.46 on the New York Stock Exchange.
(Reporting by Lisa Baertlein; Editing by Andre Grenon, Phil Berlowitz)
