Conagra Brands (CAG) Stock Drops as Company Lowers Full-Year Profit Outlook

Key Takeaways

• Third-quarter adjusted earnings per share reached $0.39, falling short of the $0.40 analyst consensus
• Quarterly revenue hit $2.79 billion, surpassing Wall Street’s $2.76 billion projection
• Annual adjusted EPS outlook trimmed to approximately $1.70, representing the lower boundary of previous guidance
• Organic sales increased 2.4%, with Frozen and Snacks divisions leading growth
• Cost pressures anticipated to reach roughly 7% for fiscal year, incorporating tariff impacts

Conagra Brands (CAG) delivered mixed third-quarter financial results, falling short on earnings while exceeding revenue projections. The packaged foods manufacturer reported adjusted earnings per share of $0.39, below the Street’s $0.40 expectation. However, quarterly revenue totaled $2.79 billion, outpacing the $2.76 billion analyst forecast.

Conagra Brands, Inc., CAG

Total net sales declined 1.9% compared to the same period last year. However, organic net sales demonstrated positive momentum with 2.4% growth, fueled by a 1.9% improvement in price/mix and a modest 0.5% uptick in volume.

The Refrigerated & Frozen division emerged as the top performer. This segment achieved 3.6% organic net sales growth, accompanied by a robust 3.9% volume increase as the company regained market position following supply chain disruptions from the previous year.

The Grocery & Snacks division delivered 1.8% organic net sales expansion. Meanwhile, Foodservice operations registered 3.6% growth.

Strength was observed across frozen single-serve meals, frozen vegetables, meat snacks, and hot cocoa product categories.

Profitability Faces Headwinds

Adjusted gross margin contracted by 112 basis points to 23.7%. While organic revenue growth and efficiency initiatives provided some support, they proved insufficient to counter escalating input expenses.

Ingredient and materials inflation is projected to approximate 7% for the complete fiscal year, including costs associated with tariffs. Adjusted net income tumbled 22.3% to $188 million.

Third-quarter adjusted operating margin reached 10.6%. Management anticipates the full-year metric will settle near the upper end of its 11.0%–11.5% target range.

Annual Forecast Reduced

Conagra revised its full-year adjusted EPS projection to approximately $1.70. This represents the bottom threshold of its prior $1.70 to $1.85 range — a move signaling caution, though the company maintains its overall forecast framework.

Management now anticipates annual net sales will land at the midpoint of its earlier projection, which encompassed a range from a 1% decrease to a 1% increase.

Escalating input expenses have presented ongoing challenges. The company had implemented pricing actions to counterbalance rising costs across ingredients including cocoa, olive oil, and palm oil, plus tariffs affecting tin-plate steel.

Consumers watching their wallets closely, reducing purchases and gravitating toward private-label alternatives have complicated pricing strategies. Additionally, the growing trend toward healthier dietary choices, partially influenced by increased adoption of weight-management medications, has created sales headwinds across the food manufacturing sector.

Full-year cost of goods sold inflation, encompassing tariff-related expenses, is forecast to approximate 7%.

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