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Sara Lee Sprints to the Finish

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With the Beijing Olympics opening ceremonies today, I'm reminded that the best sprinters save enough energy for a final burst to the finish line. Sara Lee (NYSE: SLE  ) showed this winning form in its fourth-quarter earnings release.

The company missed earnings estimates back in February, but insisted this would change in the back half and Sara Lee would make it to a full year of $0.82-$0.88 of adjusted EPS. The final quarter made up for those misses (just barely), and you could hear contented sighs around the table yesterday as the company reported $0.83 of annual adjusted EPS. A squeaker for sure, but with so many companies revising expectations down these days, you have to admire a management team that holds the line and then delivers.

Unit volume grew 1% for the fourth quarter, which looks pretty solid considering Kraft (NYSE: KFT  ) and Unilever (NYSE: UL  ) reported lower unit sales this quarter. Net sales grew 12%, with pricing and mix adding 4%, and foreign currency adjustments tacking on an additional 7%. All six business segments delivered sales gains for the quarter.

The company reported an earnings-per-share loss of $0.98 for the quarter, but previously announced one-time items related to goodwill impairment took a huge bite ($1.26) out of the results. Net of these unusual items, Sara Lee earned $0.28, $0.02 better than analyst expectations.

Despite these solid results, the stock traded down after the release. I've covered Sara Lee for a while now, and I think management could find a better way to present the "puts and takes" in their quarterly releases. There's no shortage of numbers, but they aren't organized in a way that makes year-over-year comparisons clear. The stock is rebounding today, as investors have had time to wade through all the tables.

Is Sara Lee a buy at this point? These days, I like the prospects of nearly all the consumer-products companies. As a whole, the segment has been able to increase prices without suffering significant volume hits, and it will benefit-big time if commodity and energy costs moderate -- which appears to be happening.

My top picks are still the best-in-breed companies, like Procter & Gamble (NYSE: PG  ) and Colgate-Palmolive (NYSE: CL  ) -- along with Kraft and the Warren Buffett factor. But with Sara Lee trading at 18 times trailing-12-month earnings, the company deserves a look from Foolish investors who want to buy into a commodity cost decline but don't want to pony up for rivals selling at 20-plus multiples.  

For related Foolishness:

Kraft and Unilever are Income Investor selections. Colgate-Palmolive is a former Inside Value recommendation. Check out either service free for 30 days.

Fool contributor Timothy M. Otte surveys the retail scene from Dallas. He welcomes comments on his articles, and owns shares of Kraft, but none of the other companies mentioned in this article. The Fool has a disclosure policy.

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