Core Insights - Conagra Brands Inc. reported first-quarter fiscal 2026 results that exceeded Wall Street expectations but showed year-over-year declines in key metrics [1][2] Financial Performance - The company achieved net sales of $2.63 billion, a decrease of 5.8% compared to the prior-year period, while adjusted earnings per share were 39 cents, down 26.4% [2] - Wall Street analysts had anticipated net sales of $2.62 billion and earnings of 33 cents per share [3] Sales Breakdown - The decline in net sales was attributed to a 5.1% impact from mergers and acquisitions, a 0.6% drop in organic sales, and a minor 0.1% foreign exchange effect [3] - Within organic sales, a 0.6% price/mix benefit was more than offset by a 1.2% decline in volume [4] Segment Performance - Grocery & Snacks revenue fell 8.7% to $1.1 billion, with a 1.0% decline in organic net sales [6] - Refrigerated & Frozen sales decreased 0.9% to $1.1 billion, but organic net sales rose 0.2% due to a 0.5% increase in volume [6] - International segment revenue declined 18% to $212 million, with organic net sales down 3.5% [7] - Foodservice sales dipped 0.8% to $264 million, while organic net sales rose 0.2% [7] Cash Position - Conagra reported cash and cash equivalents of $698.1 million at the end of the first quarter of fiscal 2026 [4] Management Commentary - The CEO highlighted successful supply chain objectives and a focus on disciplined execution amid ongoing inflationary pressures and cautious consumer sentiment [5] Outlook - For fiscal 2026, the company reaffirmed guidance, projecting organic net sales growth between -1% and 1%, an adjusted operating margin of 11.0%–11.5%, and adjusted EPS of $1.70–$1.85 [8]

Company Overview - Conagra Brands, Inc. (CAG) has a market cap of $8.7 billion and is a leading North American packaged foods company with a diverse portfolio including brands like Birds Eye, Healthy Choice, Slim Jim, Reddi-wip, and Marie Callender's [1] - The company operates across four segments: Grocery & Snacks, Refrigerated & Frozen, International, and Foodservice, focusing on innovative food products that cater to changing consumer preferences [1] Financial Performance - Conagra Brands is set to announce its Q1 2026 results on October 1, with analysts expecting an adjusted EPS of $0.33, a decrease of 37.7% from $0.53 in the same quarter last year [2] - For fiscal 2026, analysts forecast an adjusted EPS of $1.73, representing a 24.8% decrease from $2.30 in fiscal 2025, but anticipate an 8.7% year-over-year growth to $1.88 in fiscal 2027 [3] Stock Performance - Shares of Conagra Brands have declined over 44% in the past 52 weeks, underperforming the S&P 500 Index's 15.4% return and the Consumer Staples Select Sector SPDR Fund's 5.9% decline [4] - Following the release of weak Q4 2025 results, shares fell 4.4%, with adjusted EPS of $0.56 missing consensus estimates and net sales of $2.8 billion down 4.3% year-over-year [5] Analyst Sentiment - The consensus view on CAG stock is cautious, with a "Hold" rating from 17 analysts; two recommend "Strong Buy," 12 suggest "Hold," one advises "Moderate Sell," and two "Strong Sells" [6] - The average analyst price target for Conagra Brands is $20.47, indicating a potential upside of 13.2% from current levels [6]

Group 1 - Conagra Brands, Inc. is facing challenges due to 7% inflation and issues with tin can supply, which are negatively impacting its margins [2] - The company has a portfolio of well-known brands, including Slim Jim, Marie Callender's, and Duncan Hines, but is struggling to pass on price increases to consumers [2] - Despite these challenges, Conagra has indicated that it can maintain its dividend payments, although concerns about the sustainability of dividends are raised [2] Group 2 - Jim Cramer emphasizes the importance of growth in stocks over high dividends, suggesting that high dividends may indicate underlying problems within the company [1] - The overall sentiment is that while Conagra has potential, other sectors, particularly AI stocks, may offer better investment opportunities with less risk [2]

Core Viewpoint - The significant decline in stock prices of Conagra Brands and Campbell's Company presents a potential buying opportunity for patient investors despite the challenges faced by the packaged food industry [3][20]. Industry Overview - The packaged food industry is experiencing a severe slowdown due to pullbacks in consumer spending and inflation, which have particularly impacted packaged food companies [5]. - A shift in consumer behavior towards healthier options poses a significant challenge for the industry, especially for companies focused on frozen and processed meals [6]. Company Performance - Conagra and Campbell's stocks have both dropped over 25% year to date, reaching their lowest levels in over a decade, resulting in dividend yields of 6.8% and 5.1%, respectively [1][2][16]. - Both companies have faced difficulties due to poor acquisition decisions, with Conagra's acquisition of Pinnacle Foods for $10.9 billion and Campbell's acquisition of Snyder's-Lance for $6.1 billion being particularly criticized [11][12][13]. Financial Metrics - Conagra's free cash flow (FCF) per share is $3.02, while its dividend per share is $1.40; Campbell's FCF per share is $2.41 against a dividend of $1.52, indicating that both companies can support their dividends despite weakening balance sheets [18]. - In terms of valuations, Campbell's has a price-to-FCF ratio of 12.8 and a forward price-to-earnings (P/E) ratio of 10.5, while Conagra has a price-to-FCF ratio of 6.8 and a forward P/E of 8.3, showing that both stocks are significantly discounted compared to their historical averages [19]. Regulatory Environment - Regulatory pressures, such as the U.S. Department of Health and Human Services' measures to phase out synthetic dyes, add to the challenges faced by the industry but could lead to long-term benefits [7][9]. - Conagra announced plans to remove synthetic colors from its U.S. frozen product portfolio by the end of 2025, aligning with industry trends towards healthier ingredients [8].

Conagra Brands (CAG) Conference Summary Company Overview - Conagra Brands is one of the largest packaged food companies in the US, with a diverse portfolio including frozen snacks and shelf-stable products, serving retail, food service, and international markets. Notable brands include Marie Callender's, Birds Eye, Healthy Choice, and Slim Jim [2][4]. Key Points and Arguments Portfolio Transformation - Over the past ten years, Conagra has transformed from a diversified global holding company to a branded pure play focused on North America. This involved modernizing existing brands, acquiring new businesses, and divesting underperforming assets [4][5]. - The current portfolio has a significant focus on organic net sales from retail, particularly in frozen and permissible snacking, which now constitutes about two-thirds of retail sales [5][6]. Consumer Trends and Market Environment - The company has observed a shift towards conservatism among consumers due to prolonged inflation and economic uncertainty. This trend affects all income groups, particularly lower-income consumers [9][10]. - The current environment is characterized by cautious spending, with consumers prioritizing value and quality in their purchases [10][11]. Promotional Strategy - Conagra has reduced promotional activities compared to pre-COVID levels, focusing on high-quality merchandising rather than deep discounting. This strategy aims to drive volume growth through quality products [12][14]. - The competitive landscape remains rational, with a collective industry focus on improving volume trends after experiencing declines [16][18]. Input Costs and Inflation - The company faces significant input cost pressures, particularly from tariffs on tinplate and aluminum, with a 25% tariff impacting costs. Mitigation strategies include negotiating with suppliers and exploring alternative sourcing [20][22]. - Inflation is projected at 4% for the fiscal year, up from an initial estimate of 3%. The company is actively managing costs and exploring pricing strategies to offset inflationary pressures [26][27][54]. Frozen and Snacking Segments - The frozen food segment is experiencing a return to volume growth, driven by consumer demand for convenience and quality. The company aims to educate consumers on the benefits of frozen foods, which are perceived as high-quality and cost-effective [33][35][38]. - In the snacking category, Conagra has focused on permissible snacking options, such as meat snacks and popcorn, which have shown strong growth despite broader industry softness. The company has expanded its portfolio to include various meat snack brands [39][41][46]. Future Outlook and Guidance - The company is optimistic about maintaining volume growth and improving margins, despite ongoing supply chain challenges and inflationary pressures. The focus remains on optimizing trade management and promotional investments [49][52][54]. - Conagra plans to provide further guidance for fiscal year 2026 in the upcoming earnings call, with expectations of navigating through current uncertainties [60][62]. Capital Allocation and Debt Management - Conagra emphasizes a balanced approach to capital allocation, prioritizing debt paydown while also considering investments in business modernization and strategic acquisitions. The recent divestiture of Chef Boyardee aligns with this strategy [67][72]. - The company has successfully reduced leverage and aims to continue generating free cash flow to support debt reduction and strategic growth initiatives [64][66]. Additional Important Insights - The company has experienced supply chain disruptions, particularly in its frozen vegetable and chicken businesses, but is on track to recover by the end of the first quarter of fiscal 2026 [75][78]. - Innovations, such as the Banquet Mega Chicken Filet, have driven demand and contributed to supply challenges, highlighting the importance of product development in meeting consumer needs [79][80].

Financial Data and Key Metrics Changes - Conagra reported organic net sales of $3.2 billion in Q2, reflecting a 30 basis point increase year-over-year, driven by volume growth in the domestic retail business [19] - Adjusted gross margin was 26.4%, and adjusted operating margin was 15.3%, down 52 and 57 basis points respectively compared to the prior year, but up 110 basis points from Q1 [20] - Adjusted earnings per share (EPS) were $0.70, a decrease of $0.01 from Q2 of the previous year [20] Business Line Data and Key Metrics Changes - Grocery and Snacks segment delivered net sales of $1.3 billion, representing 1.2% organic growth driven by increased volumes and favorable price mix [21] - Refrigerated and Frozen segment also reported $1.3 billion in net sales, flat compared to the prior year, with increased volumes offset by negative price mix [21] - International segment saw organic net sales decline by 0.7%, driven by a 2.4% volume decline, partially offset by a 1.7% increase in price mix [21] Market Data and Key Metrics Changes - Conagra's portfolio held or gained volume share in 67% of its categories in Q2, marking the fifth consecutive quarter of share gains [8] - In the frozen and snacks domains, 87% of the portfolio held or gained volume share in Q2 [9] - The company outperformed its closest peer by 24 percentage points in share performance [10] Company Strategy and Development Direction - The company plans to maintain its strategy focused on brand building and innovation, despite economic pressures and inflation [5][17] - Conagra aims to prioritize top-line momentum and consumer loyalty through continued investments in brand building [17] - Limited pricing actions will be implemented to offset rising cocoa and sugar prices while maintaining a disciplined approach to brand management [17][29] Management's Comments on Operating Environment and Future Outlook - Management noted that inflation and unfavorable foreign exchange rates will pressure profitability in the second half of the fiscal year [5][15] - The expectation for inflation relief has been pushed to fiscal 2026, with ongoing economic pressures shaping consumer purchasing decisions [5][15] - The company updated its guidance for fiscal 2025, expecting organic net sales growth near the midpoint of a range of down 1.5% to flat [18][29] Other Important Information - Conagra generated $754 million in net cash flows from operating activities in the first half of fiscal 2025, down from the prior year [26] - The company has repaid over $600 million of debt in the last twelve months, aiming for a long-term net leverage goal of three times by the end of fiscal 2026 [28][31] - The adjusted tax rate is expected to be approximately 23%, down from 23.5% based on year-to-date favorability [31] Q&A Session Summary Question: What are the expectations for organic net sales growth? - The company now expects full-year organic net sales growth to be near the midpoint of the guidance range of minus 1.5% to flat growth versus fiscal 2024 [29] Question: How is the company addressing inflation and foreign exchange impacts? - Limited pricing actions will be taken to offset some inflation in cocoa and sugar, while the company remains committed to brand investments [17][29] Question: What is the outlook for free cash flow conversion? - The company expects full-year free cash flow conversion to be greater than 100%, with stronger performance anticipated in the second half of the year [28][31]

Financial Data and Key Metrics Changes - Q3 net sales were approximately $3 billion, reflecting an organic net sales decline of 2% [7][19] - Adjusted gross margin increased by 52 basis points to 28.7%, driven by increased productivity [7][20] - Adjusted operating margin was 16.4%, representing a 49 basis point decrease compared to the prior year quarter [7] - Q3 adjusted EPS was $0.69, a decrease of $0.07 over the prior year quarter [7][20] - Free cash flow for the year to date reached $1.2 billion, with a conversion rate of approximately 124% [17][27] Business Line Data and Key Metrics Changes - Grocery and Snacks segment net sales increased by 3.4% compared to the prior year, driven by improved price mix [22] - Refrigerated and Frozen segment net sales declined by 8.1%, primarily due to increased strategic investments [22] - International segment saw volume and net sales increase over the prior year quarter, driven by strong performance in Mexico and global exports [16] - Foodservice segment net sales decreased due to reduced or exited less profitable business and softness in food away from home traffic [16] Market Data and Key Metrics Changes - Approximately 52% of brands held or gained unit share, a 12% increase compared to the prior year [13] - In the frozen category, Conagra's portfolio outperformed the market on a volume basis [12][14] - Recent four weeks of volume consumption improved to -1.2% year-over-year, a 6.5 percentage point improvement since Q1 [12] Company Strategy and Development Direction - The company continues to prioritize brand building investments across merchandising, innovation, and advertising to drive volumes while sustaining gross margin recovery [10][11] - Innovation remains a key strategic tool, with plans to modernize recipes and expand product offerings [15] - The company is focused on operational efficiency and cost savings to improve margins while maintaining investment in brands [23][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving targets and driving shareholder value based on consumer response to investments and cost savings progress [5] - The company is increasing expectations for adjusted operating margin while reaffirming net sales and adjusted EPS guidance [5][28] - Management noted that the stabilization in the supply chain has enabled further productivity initiatives [8] Other Important Information - The company reduced its net leverage ratio to 3.44 times, reflecting strong free cash flow and debt reduction efforts [17][27] - Adjusted SG&A increased by 7.4%, primarily due to the timing of incentive compensation expense [20] Q&A Session Summary Question: What are the expectations for the adjusted operating margin? - The company has modestly increased its adjusted operating margin expectations to approximately 15.8% for the full year [28] Question: How is the company addressing the challenges in the Foodservice segment? - The company is focusing on reducing or exiting less profitable business while managing price mix increases to offset volume declines [16][22]