American Italian Pasta Beats Expectations

American Italian Pasta Inc. (PLB) Wednesday posted higher than expected quarterly profit as the company said there were signs that the low-carbohydrate diet trend is fading, sending its shares up nearly 20 percent.

Quarterly earnings, however, fell 74 percent as the company said there were still "consumer demand challenges" in the pasta industry.

American Italian Pasta also stood by its profit forecast for the year, and said it will raise prices in the current quarter.

Earnings for the fiscal first quarter ended Dec. 31 fell to $2.1 million, or 11 cents a share, from $8.1 million, or 44 cents a share, a year earlier.

Analysts on average forecast 9 cents a share, according to Reuters Estimates.

"While the market conditions of the pasta industry continue to present consumer demand challenges, we are encouraged by some indications of improving dynamics," said Chairman Horst Schroeder.

"The media and a number of surveys have recently indicated that the consumer focus on low-carbohydrate awareness and diets is beginning to decrease," he said in a news release.

Revenue fell 2.4 percent to $99.1 million, led by a 12 percent drop in revenue from institutional customers.

The profit report was better than expected, said William Chappell, analyst with SunTrust Robinson Humphrey. Chappell has a rating of "neutral" on shares of American Italian.

"The company must still pass off price increases and correct operational issues to meet its earnings per share guidance in 2005, but we now believe the worst is behind them," Chappell said in a research note.

American Italian was one of the companies hardest hit by the low-carb diet (search) trend, incurring costs from cutting inventories and delays in customer orders.

The Kansas City, Mo., company responded by cutting jobs, reducing production and introducing low-carb products. But sales of those products have been at the low end of the company's expectations.

For the year, American Italian confirmed its forecast calling for earnings of 80 cents to $1.00 a share and revenue of $370 million to $400 million.

Analysts on average forecast profit of 84 cents a share, according to Reuters Estimates.

Shares of American Italian were up $3.90, or 18.6 percent, at $24.85 Wednesday on the New York Stock Exchange (search), where they were the biggest gainer in percentage terms.