Core Insights - Swiss Miss has launched a new product called Swiss Miss 'Shmallow, a toasted marshmallow and cocoa-infused bourbon, in collaboration with Hotel Tango Distillery, aimed at enhancing winter festivities [1][2][3] - The product is priced at an SRP of $27.99 and will be available at select retailers and online [2][3] - Conagra Brands, the parent company of Swiss Miss, reported fiscal 2024 net sales exceeding $12 billion, highlighting its position as a leading branded food company in North America [4] Company Overview - Conagra Brands, Inc. is recognized for its extensive portfolio of well-known food brands, including Birds Eye, Duncan Hines, and Healthy Choice, and emphasizes innovation and collaboration in its operations [4] - The company has a 100-year history in the food industry and is committed to adapting to changing consumer preferences [4] Product Details - Swiss Miss 'Shmallow combines the flavors of Swiss Miss hot cocoa with a well-crafted bourbon, making it suitable for holiday gatherings and as a gift [1][2] - The bourbon features sweet notes of caramelized sugar and toasted marshmallow, designed to evoke a cozy winter experience [3][5] - The product can be mixed with Swiss Miss hot cocoa to create a winter cocktail, enhancing the overall drinking experience [2][3]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Conagra's Q1 FY2025 financial statements show a 3.8% net sales decrease to $2.8 billion, but net income rose to $466.8 million due to a significant tax benefit [Condensed Consolidated Statements of Earnings](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) Q1 FY2025 earnings show a 3.8% net sales decrease to $2.79 billion, yet net income attributable to Conagra increased 46.0% to $466.8 million due to a significant income tax benefit Condensed Consolidated Statements of Earnings (Q1 FY2025 vs Q1 FY2024) | Metric | Thirteen Weeks Ended Aug 25, 2024 | Thirteen Weeks Ended Aug 27, 2023 | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $2,794.9 million | $2,904.0 million | -3.8% | | **Income Before Income Taxes** | $328.0 million | $418.2 million | -21.6% | | **Income Tax Expense (Benefit)** | $(138.9) million | $98.3 million | N/A | | **Net Income Attributable to Conagra** | $466.8 million | $319.7 million | +46.0% | | **Diluted EPS** | $0.97 | $0.67 | +44.8% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of August 25, 2024, total assets increased to $21.25 billion and total liabilities to $12.55 billion, with stockholders' equity rising to $8.70 billion Balance Sheet Summary | Metric | August 25, 2024 | May 26, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $3,416.2 million | $3,149.5 million | | **Total Assets** | $21,247.8 million | $20,862.3 million | | **Total Current Liabilities** | $3,646.8 million | $3,241.8 million | | **Total Liabilities** | $12,552.2 million | $12,351.0 million | | **Total Stockholders' Equity** | $8,695.6 million | $8,511.3 million | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 FY2025 net cash from operating activities decreased to $268.6 million due to lower profits and working capital changes, while investing activities increased due to acquisitions Cash Flow Summary (Q1 FY2025 vs Q1 FY2024) | Cash Flow Activity | Thirteen Weeks Ended Aug 25, 2024 | Thirteen Weeks Ended Aug 27, 2023 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $268.6 million | $443.5 million | | **Net Cash from Investing Activities** | $(286.3) million | $(138.4) million | | **Net Cash from Financing Activities** | $70.1 million | $(307.1) million | [Notes to Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail Q1 events including two acquisitions totaling $230 million, a divestiture, a $210.4 million deferred tax benefit, and debt covenant compliance - In July and August 2024, the company completed two acquisitions: the manufacturing operations of a cooking spray co-manufacturer for **$50.2 million** and Sweetwood Smoke & Co. for **$180.2 million**. These acquisitions added **$174.6 million** to goodwill[32](index=32&type=chunk)[33](index=33&type=chunk)[55](index=55&type=chunk) - Completed the sale of its **51.8%** ownership stake in Agro Tech Foods Limited (ATFL) for net proceeds of **$76.8 million**, recognizing a loss of **$2.3 million** on the sale[37](index=37&type=chunk) - Recognized a significant income tax benefit of **$138.9 million**, resulting in an effective tax rate of **(42.4)%**. This was primarily due to a **$210.4 million** deferred tax benefit from the release of valuation allowances against certain deferred tax assets[71](index=71&type=chunk) - As of August 25, 2024, the company was in compliance with all financial covenants under its Revolving Credit Facility[49](index=49&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 net sales decline to trade investments and lower volumes, with gross profit decreasing due to inflation, while diluted EPS rose due to a non-recurring tax benefit [Segment Review](index=31&type=section&id=Segment%20Review) Q1 FY2025 segment review shows declining sales and operating profit in most domestic segments, with International being a bright spot due to organic sales growth Net Sales by Segment (Q1 FY2025 vs Q1 FY2024) | Segment | Q1 FY2025 Net Sales | Q1 FY2024 Net Sales | % Change | | :--- | :--- | :--- | :--- | | Grocery & Snacks | $1,182.7 M | $1,202.9 M | (1.7)% | | Refrigerated & Frozen | $1,086.4 M | $1,151.6 M | (5.7)% | | International | $259.1 M | $260.2 M | (0.4)% | | Foodservice | $266.7 M | $289.3 M | (7.8)% | Operating Profit by Segment (Q1 FY2025 vs Q1 FY2024) | Segment | Q1 FY2025 Operating Profit | Q1 FY2024 Operating Profit | % Change | | :--- | :--- | :--- | :--- | | Grocery & Snacks | $249.1 M | $258.7 M | (3.7)% | | Refrigerated & Frozen | $176.0 M | $199.2 M | (11.6)% | | International | $33.6 M | $23.7 M | 42.1% | | Foodservice | $35.1 M | $44.1 M | (20.4)% | - Refrigerated & Frozen net sales were negatively impacted by approximately **$24 million** due to temporary manufacturing disruptions in the Hebrew National® business during the key grilling season[126](index=126&type=chunk) - Foodservice volume decreased by **11.1%**, driven by the ongoing impact of lost business from the prior year and softness in restaurant traffic[128](index=128&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Conagra maintains strong liquidity with a $2.0 billion undrawn credit facility, repurchased **2.1 million** shares for **$64.0 million**, and plans **$450 million** in FY2025 capital expenditures - Cash flow from operating activities decreased to **$268.6 million** in Q1 FY25 from **$443.5 million** in Q1 FY24, driven by lower operating profits and unfavorable working capital changes[156](index=156&type=chunk) - Repurchased **2.1 million** shares of common stock for **$64.0 million** during the quarter. The remaining share repurchase authorization is **$852.6 million**[152](index=152&type=chunk) - The company has a **$2.0 billion** revolving credit facility that matures in August 2027, with no outstanding borrowings as of August 25, 2024[147](index=147&type=chunk) - Capital expenditure estimate for fiscal 2025 is approximately **$450 million**[155](index=155&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Conagra manages market risks from commodity prices, interest rates, and foreign exchange using derivatives, with a 10% adverse move impacting fair value by **$20.9 million** Fair Value Impact of a Hypothetical 10% Fluctuation | In Millions | August 25, 2024 | August 27, 2023 | | :--- | :--- | :--- | | Energy commodities | $3.5 | $2.7 | | Agriculture commodities | $7.3 | $6.7 | | Foreign exchange | $10.1 | $9.5 | - A **1%** increase in interest rates would decrease the fair value of fixed-rate debt by approximately **$369.6 million**, while a **1%** decrease would increase its fair value by approximately **$416.2 million**[163](index=163&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of August 25, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by the report[168](index=168&type=chunk) - No change in internal control over financial reporting occurred during the quarter that has materially affected, or is reasonably likely to materially affect, internal controls[169](index=169&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 13 for legal proceedings, including ongoing litigation related to lead-based paint and Pam® cooking spray product liability claims - For details on legal proceedings, the report refers to Note 13, "Contingencies", in the financial statements[170](index=170&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred to the company's previously disclosed risk factors during Q1 FY2025, with full details available in the Annual Report on Form 10-K - During the first quarter of fiscal 2025, there were no material changes to the company's previously disclosed risk factors[171](index=171&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 FY2025, Conagra repurchased **2,106,954** shares for approximately **$64.0 million**, with **$852.6 million** remaining under the share repurchase authorization Share Repurchase Activity (Q1 FY2025) | Metric | Value | | :--- | :--- | | **Total Shares Purchased** | 2,106,954 | | **Average Price Paid per Share** | $30.38 | | **Total Cost** | ~$64.0 million | | **Remaining Authorization** | $852,578,000 | [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) CEO Sean Connolly and COO Thomas M. McGough adopted Rule 10b5-1 trading plans in August 2024 for the exercise and sale of stock options expiring in 2025 - CEO Sean Connolly and COO Thomas M. McGough adopted Rule 10b5-1 trading plans in August 2024 for the exercise and sale of stock options set to expire in 2025[175](index=175&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including governance documents, stock agreements, and CEO/CFO certifications under Sarbanes-Oxley Act Sections 302 and 906 - The exhibits include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as Inline XBRL data files[177](index=177&type=chunk)

Market Overview - U.S. stocks experienced slight gains, with the Nasdaq Composite increasing by approximately 0.2% [1] - The Dow rose by 0.07% to 42,186.44, while the S&P 500 gained 0.03% to 5,710.22 [1] Sector Performance - Information technology shares increased by 0.6% [1] - Consumer staples shares saw a decline of 1% [1] Company Earnings - ConAgra Brands, Inc. reported adjusted earnings per share of 53 cents, missing the analyst consensus of 60 cents, with net sales of $2.79 billion, down 3.8% from expectations of $2.84 billion [2] - Joby Aviation, Inc. shares surged 25% to $6.02 following Toyota's announcement of an additional $500 million investment [2] - RPM International Inc. shares rose 7% to $128.37 after reporting better-than-expected first-quarter adjusted EPS [2] - MMTec, Inc. shares increased by 46% to $0.6818, benefiting from recent stimulus measures [2] Declining Stocks - Humana Inc. shares fell 13% to $242.64 due to a decline in Stars performance affecting future quality bonus payments [3] - Eagle Pharmaceuticals, Inc. shares dropped 34% to $2.35 after announcing plans to delist from Nasdaq [3] - Aditxt Inc. shares decreased by 30% to $3.1318 following a 1-for-40 reverse stock split announcement [3] Commodity Prices - Oil prices rose by 0.4% to $70.08, while gold prices fell by 0.7% to $2,672.80 [4] - Silver prices increased by 0.8% to $31.980, and copper prices rose by 1.3% to $4.65 [4] European Market Performance - European shares closed mixed, with the eurozone's STOXX 600 rising by 0.05% and Germany's DAX falling by 0.25% [5] - The unemployment rate in the Eurozone remained unchanged at 6.4% in August [5] Asian Market Performance - Asian markets closed mixed, with Japan's Nikkei 225 declining by 2.18% and Hong Kong's Hang Seng Index increasing by 6.20% [5] Employment Data - U.S. private businesses added 143,000 workers in September, exceeding market estimates of 124,000 [6] - Crude oil inventories in the U.S. rose by 3.889 million barrels, contrary to market expectations of a 1.3 million barrel decline [6]

Core Viewpoint - Conagra Brands, Inc. is conducting a Q1 Fiscal Year 2025 earnings Q&A conference call to discuss its financial results and engage with analysts [1]. Company Participants - The conference call features key company executives including Melissa Napier (Senior Vice President of Investor Relations), Sean Connolly (President and Chief Executive Officer), and David Marberger (Executive Vice President and Chief Financial Officer) [2]. Conference Call Participants - Analysts from various financial institutions are participating in the call, including representatives from JPMorgan Chase, Barclays Bank, Goldman Sachs, and Citigroup [3]. Call Structure - The call begins with an introduction by the operator, followed by a presentation from Melissa Napier, after which a Q&A session will take place [4].

Core Insights - Conagra Brands experienced a significant stock price decline of 9.95% to $29.465 following a disappointing earnings report for fiscal Q1 2025 [1] - The company reported earnings of $0.53 per share, missing the forecast of $0.59, with sales falling short of the anticipated $2.8 billion [1][2] - Adjusted earnings fell by 20%, while GAAP earnings rose by 45% due to a one-time $210 million income tax benefit [1] Financial Performance - Sales decreased by 4% in Q1, and operating profit margins dropped nearly 250 basis points to 14.4% [1] - Conagra anticipates adjusted earnings for fiscal 2025 to be between $2.60 and $2.65 per share, with a predicted smaller sales decline and improved operating profit margins of 15.6% or higher [2] - The company expects to convert 90% of operating profit to free cash flow, amounting to at least $1.1 billion for the year [2] Valuation Metrics - Conagra's GF Value is $35.33, indicating the stock is modestly undervalued [2] - The stock's PE ratio is 40.36, close to its 10-year high, suggesting potential overvaluation based on historical earnings [2] - The price-to-book ratio stands at 1.67, which is relatively moderate compared to the industry [2] Dividend and Financial Health - The company's dividend yield is 4.76%, which is attractive compared to peers [3] - Conagra's Altman Z-Score is 1.92, indicating some financial stress but not at bankruptcy levels [3] - The Beneish M-Score of -3.03 suggests it is unlikely to be a manipulator, which is a positive sign for investors [3] Future Outlook - Despite recent setbacks, Conagra's strategic initiatives aimed at improving profit margins and converting a significant portion of operating profit into free cash flow could bode well for its long-term growth [3]

Group 1 - Conagra Brands Inc (CAG) shares fell 9.29% on October 2, reaching an intraday low of $29.38 before slightly recovering to $29.68, down from a previous close of $32.72 [1] - The current stock price is 10.71% below its 52-week high of $33.24 and 17.97% above its 52-week low of $25.16 [1] - Trading volume was 9,084,945 shares, which is 189.5% of the average daily volume of 4,793,746 [1] Group 2 - The average one-year price target for Conagra Brands Inc (CAG) is $31.30, with a high estimate of $36.00 and a low estimate of $28.00, implying a potential upside of 5.44% from the current price of $29.68 [2] - The average brokerage recommendation for Conagra Brands Inc is currently 2.8, indicating a "Hold" status on a scale from 1 (Strong Buy) to 5 (Sell) [2] - GuruFocus estimates the GF Value for Conagra Brands Inc in one year to be $35.37, suggesting a potential upside of 19.17% from the current price of $29.68 [2]

Core Insights - Conagra Brands, Inc. (CAG) reported disappointing first-quarter fiscal 2025 results, with both earnings and sales declining year over year and missing Zacks Consensus Estimates [1][2] - Despite challenges, the company made progress on key priorities, including meeting domestic retail volume expectations and expanding market share [1] Financial Performance - Adjusted EPS for the quarter was 53 cents, missing the Zacks Consensus Estimate of 59 cents, representing a negative surprise of -10.2% and a year-over-year decline of 19.7% [2] - Net sales totaled $2,794.9 million, down 3.8% year over year and below the Zacks Consensus Estimate of $2,839 million, with a 0.4% negative impact from currency movements [2] - Organic net sales decreased by 3.5% year over year, driven by a 1.6% drop in volumes and a 1.9% adverse effect from price/mix due to strategic investments [2] Segment Performance - Grocery & Snacks segment reported net sales of $1,182.7 million, down 1.7% year over year, with organic sales falling 1.9% due to a 1.8% drop in volumes [4] - Refrigerated & Frozen segment saw net sales decline 5.7% year over year to $1,086.4 million, with organic sales also down [4] - International segment net sales dropped 0.4% year over year to $259.1 million, while Foodservice sales declined 7.8% year over year to $266.7 million [5] Profitability Metrics - Adjusted gross profit decreased 9.4% year over year to $726 million, with adjusted gross margin contracting by 163 basis points to 26% [3] - Adjusted EBITDA fell 13.8% year over year to $528 million [3] Financial Health - The company ended the quarter with cash and cash equivalents of $128.7 million and long-term debt of $7,485.6 million [6] - Conagra generated $269 million in net cash flows from operating activities, with capital expenditures of $133 million and free cash flow of $136 million [6] Future Outlook - For fiscal 2025, organic net sales growth is expected to range from a 1.5% decline to flat, with adjusted EPS projected between $2.60 and $2.65 [7] - The company anticipates a net leverage ratio of nearly 3.2 and full-year net inflation around 3.2% [7] - Capital expenditures are expected to be approximately $450 million, with interest expenses projected at $415 million [7]

Group 1 - Conagra Brands, Inc. is a significant food supplier to supermarkets and consumers [1] - The company was recommended as a buy at the beginning of the year when shares were approximately $28, focusing on income generation [1]

Financial Data and Key Metrics Changes - The company reported adjusted EPS of $0.53 for Q1 fiscal 2025, down from $0.66 in the prior year, primarily due to a decline in adjusted operating profit and unfavorable foreign exchange rates [26][28] - Adjusted operating margin decreased by 244 basis points year-over-year to 14.2%, impacted by price/mix dynamics, increased cost of goods sold inflation of 3.3%, and higher SG&A expenses [24][25] Business Line Data and Key Metrics Changes - Grocery and Snacks segment delivered organic net sales of approximately $1.2 billion, a decline of 1.9% year-over-year, primarily due to lower volumes [22] - Refrigerated and Frozen segment reported approximately $1.1 billion in net sales, down 5.7% from the prior year, with a significant impact from the Hebrew National manufacturing disruption [22][23] - The International segment achieved a 3% increase in organic net sales, driven by strong performance in Global Exports [23] Market Data and Key Metrics Changes - The company experienced a 47% decline in revenue for the Hebrew National brand in Q1 due to a manufacturing disruption, which equated to a 60 basis point reduction in total volume and a 90 basis point reduction in total organic net sales [8][21] - Approximately 71% of the company's portfolio held or gained volume share, with 93% of frozen and snack brands holding or gaining volume share during the quarter [11][12] Company Strategy and Development Direction - The company is focused on a value-over-volume strategy in Foodservice, which has helped sustain margins at pre-COVID levels despite channel softness [7] - The acquisition of FATTY Smoked Meat Sticks is part of the company's portfolio reshaping initiatives, aimed at expanding its position in the high-growth, high-margin meat sticks category [7][19] - The company plans to continue active portfolio reshaping through both acquisitions and divestitures to position itself for further growth and margin expansion [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving fiscal 2025 goals despite challenges in the consumer environment, citing strong execution against key priorities [6][20] - The company expects sequential volume recovery each quarter and anticipates adjusted operating margin improvement to be greater in the second half of fiscal 2025 [28][29] Other Important Information - The company generated $269 million in net cash flows from operating activities in Q1, with capital expenditures of $133 million and dividends paid of $167 million [27] - The company reaffirmed its full-year fiscal 2025 guidance, expecting inflation of approximately 3.2% in total cost of goods sold, up from the previously projected 3% [29][30] Q&A Session Summary Question: What are the expectations for volume recovery in fiscal 2025? - Management expects sequential volume recovery each quarter, with improvement in volume, topline, and margin compared to Q1 [28] Question: How is the company addressing inflationary pressures? - The company is forecasting full-year inflation of approximately 3.2% in total cost of goods sold, primarily driven by proteins and sweeteners, while seeing deflation in select areas [29] Question: What impact do the recent acquisitions have on the company's financials? - The company does not expect any material impact on fiscal 2025 margin or adjusted EPS from the first quarter M&A transactions, but anticipates a decrease in overall reported net sales of approximately $30 million for the remainder of the fiscal year [29]

Core Viewpoint - Conagra is facing significant backlash after missing earnings expectations due to a larger-than-expected year-over-year sales decline in Q1, marking a surprising deviation from its previous performance since Q3 2020 [1] Group 1: Financial Performance - Conagra's earnings and sales fell by 19.7% and 3.8% year-over-year, respectively [2] - Organic net sales, excluding foreign exchange impacts, divested businesses, and M&A, declined by 3.5% [2] - Volumes decreased by 1.6% year-over-year, marking Conagra's 14th consecutive quarter of volume decline [2] Group 2: Operational Challenges - A manufacturing disruption at the Hebrew National hotdog plant during peak grilling season led to a 47% drop in sales year-over-year for that brand [2] - The disruption reduced consolidated volumes by 60 basis points and total organic sales by 90 basis points [2] - The Refrigerated and Frozen segment experienced a loss of an estimated 150 basis points in volumes and 210 basis points in organic net sales [2] Group 3: Management Outlook - Management expects Q1 to be an outlier, with most of the impact from the plant disruption confined to this quarter [3] - The company reiterated its FY25 guidance, including adjusted EPS of $2.60-2.65 and organic sales growth from negative 1.5% to flat year-over-year [3] - Management noted that staples volumes should continue to improve as the company exits Q1, with around 71% of Conagra's portfolio holding or gaining volume share in Q1 [2]