Conagra's second quarter faced notable headwinds, drawing a negative market response as both revenue and adjusted earnings per share came in below Wall Street expectations. Management attributed the underperformance to persistent inflationary pressures, particularly in animal protein inputs and packaging, as well as lingering supply chain constraints that impacted production in core categories like frozen foods and snacks. CEO Sean Connolly acknowledged, “the confluence of high inflation and higher investment to drive volume translates to temporary margin compression,” highlighting the deliberate trade-off between supporting brand strength and short-term profitability.
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Conagra (CAG) Q2 CY2025 Highlights:
- Revenue: $2.78 billion vs analyst estimates of $2.83 billion (4.3% year-on-year decline, 1.7% miss)
- Adjusted EPS: $0.56 vs analyst expectations of $0.61 (8.2% miss)
- Adjusted EBITDA: $479.9 million vs analyst estimates of $511.5 million (17.3% margin, 6.2% miss)
- Adjusted EPS guidance for the upcoming financial year 2026 is $1.78 at the midpoint, missing analyst estimates by 27.6%
- Operating Margin: 11.5%, up from -19.1% in the same quarter last year
- Organic Revenue fell 4.3% year on year (-2.4% in the same quarter last year)
- Sales Volumes fell 2.5% year on year, in line with the same quarter last year
- Market Capitalization: $9.09 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Conagra’s Q2 Earnings Call
- Andrew Lazar (Barclays) asked if current challenges are structural or cyclical. CEO Sean Connolly said, “we do not see it as structural,” emphasizing expected margin expansion through productivity, innovation, and eventual inflation relief.
- Peter Galbo (Bank of America) questioned the rationale for maintaining the dividend given high payout ratios and capital needs. CFO Dave Marberger responded that cash flow supports investment, debt reduction, and maintaining the dividend without compromising priorities.
- Leah Jordan (Goldman Sachs) asked how pricing actions will impact volume given consumer value-seeking behavior. Connolly explained that elasticity in Conagra’s categories is lower than peers, and pricing is tailored—growth businesses focus on volume, while canned foods prioritize cash flow.
- Max Gumford (BNP Paribas) sought color on margin trajectory and manufacturing footprint. Connolly and Marberger described this year as an investment period, expecting supply chain investments and productivity gains to restore margins in subsequent years.
- Chris Carey (Wells Fargo) inquired about the feasibility of planned productivity gains and the impact of private label competition. Connolly and Marberger highlighted ongoing automation and efficiency programs, with close monitoring of price gaps in categories facing strong private label presence.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will focus on (1) the pace of volume recovery in frozen and snack brands as supply chain investments come online, (2) Conagra’s ability to offset cost inflation and tariffs through productivity and targeted pricing, and (3) further portfolio adjustments or divestitures aimed at concentrating on higher-growth categories. We also view execution of new product launches and supply chain projects as important markers for sustained improvement.
Conagra currently trades at $19.03, down from $20.37 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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