CAG Q4 Deep Dive: Volume Weakness and Margin Pressures Shape Outlook for Conagra

Packaged foods company Conagra Brands (NYSE:CAG) met Wall Streets revenue expectations in Q4 CY2025, but sales fell by 6.8% year on year to $2.98 billion. Its non-GAAP profit of $0.45 per share was 3.2% above analysts’ consensus estimates.

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StockStory’s Take

Conagra’s fourth quarter was marked by weaker sales volumes and a significant drop in operating margin, with the market reacting negatively to the results. Management attributed the year-over-year sales decline to persistent supply constraints in frozen foods, delayed seasonal demand, and a competitive promotional environment. CEO Sean Connolly noted that, “Our goal this quarter in Frozen was to reclaim the market share that we basically loaned out to a competitor when we had supply constraints beginning last winter.” The company also faced continued inflationary pressures in key protein inputs, which weighed on profitability.

Looking ahead, management is focused on driving organic sales growth in the second half of the year through renewed promotional activity, innovation, and improved supply chain resiliency. Connolly emphasized, “We absolutely expect margin expansion going forward, particularly in frozen, and the building blocks have not changed.” The company’s ongoing Project Catalyst, which aims to automate core business processes and enhance efficiency, is expected to contribute to long-term margin recovery. Management remains cautious given the volatile environment but maintains its outlook for adjusted earnings as it executes on these strategic priorities.

Key Insights from Management’s Remarks

Conagra’s leadership pointed to several operational and market factors driving quarterly results and shaping the path forward.

• Frozen foods supply recovery: Supply constraints that impacted frozen meals last year have largely been resolved, enabling Conagra to regain nearly all lost market share in single-serve frozen meals. Management described this as a key achievement, with the segment’s momentum expected to continue.
• Promotional activity and pricing: Rather than reducing prices to stimulate demand, Conagra focused on maintaining existing price levels and layering in targeted, high-quality promotions. CEO Sean Connolly noted that “the volume inflection we’re seeing is very efficient,” suggesting disciplined promotional strategies are supporting the recovery in core categories.
• Protein inflation and category shifts: While chicken input costs showed some relief, higher beef and pork costs offset these gains. The company is seeing strong performance in chicken-based products, reflecting consumer trade-down from higher-priced proteins and aligning with broader industry trends.
• Innovation and health trends: New product development is increasingly focused on high-protein, clean-label, and value-oriented offerings, responding to consumer demand for health and wellness. Management highlighted strong engagement from younger consumers, particularly in protein-focused brands like Slim Jim and Healthy Choice.
• Project Catalyst launch: The company initiated Project Catalyst, a comprehensive effort to automate and modernize core business processes using technologies such as artificial intelligence. Leadership expects this initiative to drive both efficiency gains and future margin expansion, with more details to be provided in the coming year.

Drivers of Future Performance

Conagra’s outlook is anchored in efforts to restore volume growth, expand margins, and strengthen operational efficiency amid a volatile backdrop.

• Frozen and snacks momentum: Management expects renewed growth in frozen foods and snacks, driven by improved merchandising, strong innovation pipelines, and focused marketing programs. These categories are expected to lead organic sales recovery in the upcoming quarters.
• Margin expansion initiatives: The company is targeting margin improvement through productivity gains, ongoing supply chain investments, and the repatriation of outsourced production—especially in chicken. Project Catalyst is anticipated to generate further efficiency and cost savings over time.
• Volatility and input costs: Leadership remains cautious about ongoing volatility in commodity prices, particularly in proteins, and the potential for retailer inventory adjustments to impact short-term volumes. The company is also monitoring competitive pricing moves among peers but believes its current promotional approach is sustainable.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will be closely watching (1) the pace of volume recovery in frozen and snacks as supply and merchandising normalize, (2) the effectiveness of Project Catalyst in delivering tangible margin and efficiency gains, and (3) the ability to offset input cost pressures through productivity and innovation. Ongoing competitive pricing dynamics and consumer health trends will also remain key areas of focus.

Conagra currently trades at $17.38, down from $17.80 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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