Source: Davit Kirakosyan
Conagra Brands Reports Disappointing Q4 Results
Shares of Conagra Brands (NYSE:CAG), a leading player in the packaged food industry, took a plunge on Thursday, sliding by approximately 4%. The dip was in response to the company’s less-than-stellar fourth-quarter results and a cautious outlook for fiscal 2026 that fell short of Wall Street predictions by a considerable margin.
The company’s adjusted earnings per share (EPS) for the fiscal fourth quarter were reported at $0.56, failing to meet the $0.59 consensus. Moreover, the company’s revenue also witnessed a downward trend, falling by 4.3% year-over-year to land at $2.78 billion. This was significantly lower than analyst estimates, which had placed revenue predictions at $2.85 billion.
Key Drivers Behind the Revenue Miss
The revenue shortfall was primarily driven by a decline in organic sales, which dipped by 3.5%. This fall was attributed to a combination of lower volumes and modest pricing pressure. However, it’s worth noting that this is not a problem unique to Conagra. Many consumer staples companies have been grappling with similar challenges in recent times, including rising commodity prices and supply chain disruptions.
Conagra’s Dim Outlook for Fiscal 2026
Adding to investor concerns, Conagra provided a 2026 fiscal outlook that significantly failed to live up to expectations. The company forecasts an adjusted EPS between $1.70 and $1.85, a far cry from the $2.19 analysts had anticipated. In terms of organic sales, the company expects them to be flat at best. Operating margins are projected to fall within the range of 11.0% and 11.5%, further dampening the mood among investors.
Inflation and Tariffs: Conagra’s Key Challenges
Conagra attributed its cautious outlook to ongoing inflation and the newly introduced U.S. tariffs. The company expects core inflation to be around 4%, while tariffs could increase the company’s annual cost of goods sold by approximately 3% before any cost-offsetting measures can be implemented. The latter is particularly concerning, as it could significantly impact Conagra’s bottom line and operating margins if not appropriately managed.
Fiscal 2025 Performance
In fiscal 2025, Conagra reported a 3.6% decline in net sales to $11.6 billion and a 13.9% drop in adjusted EPS to $2.30. Despite these weak results, it’s important to note that the company managed to reduce its net debt by 4.4% to $8.0 billion. Furthermore, it generated $1.7 billion in operating cash flow, offering a glimmer of stability in an otherwise uncertain environment.
Conclusion
In conclusion, Conagra’s Q4 results and fiscal 2026 outlook have clearly disappointed investors, leading to a decline in its share price. The company is facing numerous challenges, including ongoing inflation, new tariffs, and a drop in organic sales. However, its ability to reduce net debt and generate healthy operating cash flow amid these challenges provides a silver lining. As the company continues to navigate these challenging times, investors should closely monitor its cost management strategies and efforts to improve volumes and pricing.