Looking for Safety? People Have to Eat and That's Why I Love This Food CompanyIt’s impossible to get more basic or old economy than Chef Boyardee.

The brand is owned by ConAgra Foods, Inc. (CAG), which is one of North America’s largest packaged-food enterprises. The company’s brands are found in 97% of American households, and it has a large commercial foods segment.

ConAgra just reported a very good quarter, especially considering how mature and competitive the food business is. Frankly, the company’s sales and earnings were quite impressive.

Total revenues for the 13 weeks ended May 26, 2013 grew to $4.59 billion, up 33.7% over the comparable quarter. The company’s consumer foods division grew 7.3% to 2.3 billion, while commercial foods grew 3.5% to $1.33 billion. The rest of the revenue gain came from the acquisition of Ralcorp Holdings, Inc., which added $962 million to revenues and $108 million in operating earnings.

In its fiscal fourth quarter of 2013, ConAgra’s earnings were a solid $192 million, compared to a loss of $86.2 million in the same quarter last year.

For its full fiscal year (ended May 26, 2013), ConAgra’s total sales grew 15.9% to $15.5 billion. Earnings grew an impressive 65.4% to $774 million.

The company’s cash balance also grew significantly to $184 million, and shareholders’ equity jumped to $5.4 billion, up from $4.5 billion.

ConAgra’s 20-year stock chart is featured below:

Conagra Inc Chart

Chart courtesy of www.StockCharts.com

The company’s share price recently crossed below its 50-day simple moving average, but as the above chart illustrates, the shares have clearly broken out after a long consolidation.

Currently yielding three percent on the stock market, this position looks to be fully priced with a price-to-earnings ratio of around 29.

But what the Street likes about the company’s return to profitability was its solid forecast for the future.

This fiscal year, the company expects its adjusted earnings per share (for comparability purposes) to be $2.40, representing 11% comparable growth.

Management cited a strong earnings contribution from its Ralcorp acquisition and continued growth in its consumer foods division as reasons for the solid forecast.

The company expects some $300 million in annual pre-tax cost synergies from the Ralcorp business by the end of fiscal 2017.

Because of this, annual adjusted diluted earnings per share between fiscal 2015 and 2017 are targeted at a minimum of 10%.

The company forecasts annual adjusted earnings-per-share growth of between seven and nine percent for the long term, with annual sales growth expected to be between three and four percent.

This is an improvement over ConAgra’s previous expectations, and while the earnings forecast might not seem that robust, they are very solid for such a large and mature enterprise. Institutional investors want certainty, and that’s exactly what ConAgra delivered in its latest quarter. They bid the shares significantly on the company’s earnings results.

The numbers so far are modest, but generally holding up much like in the first quarter. There have been some earnings surprises, both up and down. (See “Stock Market Fake-Out: Where Is the Retrenchment?”)

Big investors are still nibbling away at positions, and as earnings season gets into full swing, this will be the biggest trading catalyst.

From my perspective, the stock market remains a big hold. Interest rates are going up as they should be. They’ve been held down for far too long. Large-cap balance sheets remain excellent.