Earnings Preview: Sara Lee

OVERVIEW: Since spinning off its clothing unit Hanesbrands Inc. in September 2006, Sara Lee Corp., like other food makers, has faced pressure from record-high costs for grain and other commodities.

In December, the company, which makes namesake desserts, Ball Park hot dogs and Hillshire Farm deli meats, said its food-service business will be the exclusive provider of Dunkin' Donuts coffee to food-service outlets. Terms were undisclosed.

BY THE NUMBERS: Analysts polled by Thomson Financial expect net income of 26 cents per share on revenue of $3.42 billion.

ANALYST TAKE: D.A. Davidson analyst Tim Ramey said in a note to investors last Thursday he sees improvement in most categories except food service.

"We see a strong performance out of North American retail meats, up 25 percent year-over-year," he wrote. "U.S. bakery should post a substantial operating income gain as well, albeit off of a relatively low $6 million level a year ago."

He predicts a 20 percent gain for company's coffee segment and "attractive" results from household and body care.

Deutsche Bank analyst Eric Katzman wrote in a note last Friday that Sara Lee's international business which accounts for about 44 percent of sales, should be helped by the weaker dollar.

"Provided management has not hedged, these and other currency tailwinds could help buffer the sting of rising commodity costs, although local costs will be an offset," he wrote.

WHATS AHEAD: In January, ValueAct Capital, a San Francisco-based hedge fund, bought 5 percent of the company's stock, a move that might eventually lead to shareholder pressure for change.