Conagra Q3 Earnings Miss Estimates, Organic Sales Decline 5.2% Y/Y

Conagra Brands, Inc. CAG posted third-quarter fiscal 2025 results, wherein both top and bottom lines missed the Zacks Consensus Estimate. Both net sales and earnings experienced year-over-year declines.

The company brands demonstrated resilience with strong consumption trends and market share gains. However, shipments lagged due to supply constraints. The company is actively replenishing inventory and improving customer service levels. While keeping a close watch on external market conditions, Conagra remains committed to execution and has reaffirmed its fiscal 2025 guidance.

CAG’s Quarterly Performance: Key Metrics and Insights

Conagra’s quarterly adjusted earnings per share (EPS) were 51 cents, which missed the Zacks Consensus Estimate of 52 cents. Additionally, the bottom line declined 26.1% year over year due to the decrease in adjusted gross profit.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Conagra Brands Price, Consensus and EPS Surprise

Conagra Brands price-consensus-eps-surprise-chart | Conagra Brands Quote

The company generated net sales of $2,841 million, which declined 6.3% year over year, missing the Zacks Consensus Estimate of $2,889 million. The top-line decline resulted from a decrease in organic net sales, adverse currency movements and an unfavorable impact of M&A.

Organic net sales decrease 5.2% year over year due to a 2.1% negative impact from price/mix and a 3.1% decrease in volume. The price/mix decline was caused by increased strategic investments in the company's domestic retail business and a 70-basis-point headwind from a revised estimate related to the second quarter of fiscal 2025 trade expense accrual.

The adjusted gross profit declined 19.1% year over year to $704 million due to lower net sales, cost of goods sold inflation and unfavorable operating leverage. The adjusted gross margin contracted 389 basis points (bps) to 24.8%.

Adjusted SG&A expenses, excluding advertising and promotional costs, decreased 7.9% year over year to $342 million due to lower incentive compensation.

Adjusted EBITDA (including equity method investment earnings and pension and post-retirement non-service income) was $514 million, down 18.9% year over year.

Decoding CAG’s Segmental Performance

Grocery & Snacks: Quarterly net sales in the segment were $1,245.4 million, down 3.2% year over year. M&A contributed a 0.7% sales boost, while organic sales declined 3.9%, caused by a 1.3% drop in volume and a 2.6% decrease in price/mix. The price/mix decline was primarily due to increased strategic investments and an estimated 80-basis-point headwind from a revised trade expense accrual for the second quarter of fiscal 2025.

Refrigerated & Frozen: Net sales and organic sales decreased 7.2% year over year at $1,115.6 million. The price/mix fell 4.2%, while volume decreased 3%. Volume was negatively impacted by supply constraints, affecting the company’s frozen meals containing chicken and frozen vegetable products.

International: Net sales dropped 17.6% year over year to $223.9 million. Organic net sales dipped 1.2%. M&A had a 7.9% negative effect on sales and adverse currency effects impacted the metric by 8.5%. Organic sales included a 4.4% increase in the price/mix and a volume decline of 5.6%. 

Foodservice: Reported sales declined 6.1% year over year to $256.1 million. Organic sales fell 6.3% and M&A positively contributed 0.2% to reported sales. The price/mix improved 3.7%, whereas volumes declined 10% due to ongoing softness in commercial traffic.

CAG’s Financial Health Snapshot

The company exited the quarter with cash and cash equivalents of $49.4 million, senior long-term debt (excluding current installments) of $6,236.8 million and total stockholders’ equity of $8,779.1 million. 

In the first three quarters of fiscal 2025, Conagra generated $1,346.2 million in net cash flows from operating activities, with capital expenditures amounting to $304.2 million. The company generated a free cash flow of $1,042 million. During the quarter, Conagra paid a dividend of 35 cents per share.

What to Expect From CAG in FY25?

For fiscal 2025, the company expects a 2% decline in organic net sales growth. The adjusted operating margin is projected to be 14.4%, while adjusted earnings are forecasted to be $2.35 per share, down from $2.67 in fiscal 2024. Capital expenditure is likely to be around $410 million.

Shares of this Zacks Rank #4 (Sell) company have tumbled 1.9% in the past three months against the industry’s growth of 2.8%.

Some Solid Bets

United Natural Foods, Inc. UNFI distributes natural, organic, specialty, produce and conventional grocery and non-food products in the United States and Canada. It currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

The consensus estimate for United Natural Foods’ current financial-year sales and earnings implies growth of 1.9% and 485.7%, respectively, from the year-ago figures. UNFI delivered a trailing four-quarter earnings surprise of 408.7%, on average.

Utz Brands UTZ engages in the manufacture, marketing and distribution of snack foods in the United States and presently carries a Zacks Rank of 2. UTZ delivered a trailing four-quarter earnings surprise of 8.8%, on average.

The Zacks Consensus Estimate for Utz Brands’ current financial-year sales and earnings indicates growth of 1.2% and 10.4%, respectively, from the year-ago numbers.

BRF S.A. BRFS raises, produces and slaughters poultry and pork for processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products. It currently carries a Zacks Rank of 2. BRFS delivered a trailing four-quarter earnings surprise of 9.6%, on average.

The Zacks Consensus Estimate for BRF S.A.'s current fiscal-year sales and earnings indicates growth of 0.3% and 22.2%, respectively, from the prior-year levels.

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