Key Highlights
- Third-quarter adjusted earnings per share came in at $0.39, falling short of the $0.40 analyst consensus
- Quarterly sales reached $2.79 billion, surpassing Wall Street’s $2.76 billion projection
- Annual adjusted EPS outlook tightened to approximately $1.70, representing the lower bound of previous expectations
- Organic sales growth hit 2.4%, with strength in the Frozen and Snacks divisions
- Input cost inflation projected at roughly 7% for fiscal year, incorporating tariff impacts
Conagra Brands (CAG) delivered mixed third-quarter financial results, falling short on earnings while exceeding sales projections. The packaged food manufacturer reported adjusted earnings per share of $0.39, below the Street’s $0.40 expectation. However, quarterly sales of $2.79 billion outpaced the anticipated $2.76 billion.
Total net sales declined 1.9% compared to the prior year period. However, organic net sales demonstrated positive momentum with 2.4% growth, fueled by a 1.9% improvement in price/mix and a 0.5% uptick in volume.
The Refrigerated & Frozen division delivered particularly strong performance. Organic sales in this segment climbed 3.6%, with volume increasing 3.9% as the company regained market position following supply chain disruptions experienced in the previous fiscal year.
The Grocery & Snacks division recorded 1.8% organic sales expansion. The Foodservice channel contributed 3.6% growth.
Chief Executive Officer Sean Connolly expressed satisfaction with the quarterly performance. “I am pleased with our third quarter performance as we returned the business to organic net sales growth, reflecting continued upward inflection in our Frozen and Snacks businesses while remaining on track in our cash businesses,” he stated.
Volume improvements were particularly notable in frozen single serve meals, frozen vegetables, meat snacks, and hot cocoa categories.
Profitability Challenges Persist
Adjusted gross margin contracted by 112 basis points to 23.7%. While higher organic sales and productivity initiatives provided some support, they proved insufficient to counterbalance escalating input expenses.
The company now anticipates cost of goods sold inflation will approach approximately 7% for the complete fiscal year, including tariff-related expenses. Adjusted net income decreased 22.3% to $188 million.
Third-quarter adjusted operating margin stood at 10.6%. Management forecasts the full-year metric will settle near the upper end of its 11.0%–11.5% target range.
Annual Outlook Reduced to Lower Range
Conagra has revised its full-year adjusted EPS guidance to approximately $1.70. This represents the bottom of its prior $1.70 to $1.85 range—a clear signal of caution, though the company maintained its floor guidance level.
The food maker now projects annual net sales at the midpoint of its earlier forecast, which indicated a potential range from a 1% decrease to a 1% increase.
Escalating input expenses have presented persistent challenges. Conagra had implemented pricing actions to counterbalance surging costs for ingredients including cocoa, olive oil, and palm oil, along with tariffs affecting tin-plate steel.
Cost-sensitive consumers reducing expenditures and gravitating toward value-oriented brands have complicated these pricing strategies. Additionally, the growing consumer preference for healthier food options, partially influenced by increased adoption of weight-loss medications, has created headwinds for traditional packaged food companies.
Full-year cost of goods sold inflation, encompassing tariff-related impacts, is projected to reach approximately 7%.
