CONAGRA FOODS INC. $27 (New York symbol CAG; Income Portfolio, Consumer sector; WSSF Rating: Above average) makes a wide variety of frozen and packaged foods. Top brands include Chef Boyardee (pasta), Hunt’s (tomato sauce), Orville Redenbacher’s (popcorn) and Van Camp’s (beans). It also supplies ingredients to other food companies.

In the past few years, ConAgra has sold its fresh and packaged meat and other non-core operations to focus on its more profitable packaged food businesses.

ConAgra is now working to cut its costs with a new restructuring plan, including plant closures and streamlining its other operations. It will also sell more of its low-margin businesses.

In its first fiscal quarter ended August 27, 2006, income from continuing operations fell 65.6%, to $0.21 a share (total $108.5 million) from $0.61 a share ($319.2 million) a year earlier. But the drop was mostly due to a $329.4 million (pre-tax) gain on the sale of an asset in the year-earlier quarter. Sales crept up to $2.69 billion from $2.67 billion.

Asset sales have generated about $650 million for ConAgra in the past few months, while the latest restructuring should cut its annual expenses by $80 million.

It plans to use the cash to pay down long-term debt of $3.15 billion (67% of stockholders’ equity), and buy back stock. It spent $52.9 million on buybacks in the latest quarter, and still has $650 million to spend under its current share repurchase authorization.

Although ConAgra owns some of the top brands in the industry, less popular brands account for about a third of its portfolio. The company hopes that better advertising will help spark sales of these brands. It also plans to step up new product development.

ConAgra’s poor earnings cut its stock to $18 in March 2006. But new management and the initial success of its restructuring helped it rebound.

It now trades at 21.4 times its fiscal 2007 earnings forecast of $1.26 a share. The $0.72 dividend seems safe, and yields 2.7%.

ConAgra is a buy.