Packaged-foods company ConAgra (NYSE: CAG) turned in a solid quarter to kick off its fiscal 2010. Reported results, however, either mask or overstate the strength of the underlying business.

The company behind brands such as Marie Callender's, Healthy Choice, and Hunt's posted revenue of $2.96 billion. That's down 3% year over year, and a forkful shy of analysts' expectations. Meanwhile, a 22% jump in operating profit increased earnings per share (excluding special items) to $0.38 -- a 41% gain over last year's similarly adjusted figure. With the top and bottom lines sending mixed signals, let's dig into this quarterly casserole and see whether we can't clarify the picture.

Beginning with top-line performance, we'll make exhibit No. 1 ConAgra's consumer segment, which carted in 63% of the quarter's sales. Revenue here was up 1%, and management cited sales and market share growth in Orville Redenbacher's, Snack Pack, Healthy Choice, and other big brands.

Volume, however, was down 1%. But lower Slim Jim sales -- the consequence of a June plant accident that temporarily took supply offline -- dragged volumes down 2% all by themselves. Another 1% of margin decline came from management's efforts to weed out lower-margin aspects of its business, but in exchange, those moves fattened the profit margin. Contrary to reported figures, it appears that the segment is-well positioned for moderate growth on enhanced profitability. Plus, management expects insurance to cover much of the Slim Jim-related financial losses.

Exhibit No. 2 is ConAgra's commercial segment, which, among other operations, supplies potato products to the likes of SYSCO (NYSE: SYY), Yum! Brands (NYSE: YUM), and Burger King (NYSE: BKC). The weak restaurant environment continues to pose a challenge: Segment sales were down 9% on lower volumes and prices. Operating profit was modestly up, although management expects the annual figure to be flat compared to 2009.   

Ultimately, while the company's outsized exposure to the restaurant industrygives me pause, I believe investors can look forward to better companywide revenue and volume numbers in coming quarters. However, I wouldn't get too comfy with the notion of similar earnings growth ahead. Sure, management's been on a roll with its cost-cutting program -- helping to bring subpar operating marginsup to snuff. But management noted on the conference call that lower input inflation year over year also played a role in the profit leap.

Looking forward, unless commodity costs spiral endlessly downward, there'll come a time when price declines in grain, oil, steel and others no longer grace the company with automatic profit gains. Then again, that will go for all packaged-foods companies. I continue to believe that ConAgra, along with J.M. Smucker (NYSE: SJM) and General Mills (NYSE: GIS), is one of the industry names best positioned to outperform during the recession.

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