TLDR
- Third-quarter adjusted earnings per share reached $0.39, falling short of the $0.40 analyst consensus
- Quarterly revenue hit $2.79 billion, surpassing the anticipated $2.76 billion
- Annual adjusted EPS forecast tightened to approximately $1.70, representing the bottom of the previous guidance range
- Organic sales growth reached 2.4%, powered by strong performance in Frozen and Snacks divisions
- Full-year cost of goods sold inflation projected at roughly 7%, incorporating tariff-related expenses
Conagra Brands (CAG) delivered mixed third-quarter financial results, falling short on earnings while exceeding revenue projections. The packaged foods manufacturer reported adjusted earnings per share of $0.39, below the Wall Street consensus of $0.40. Meanwhile, quarterly revenue reached $2.79 billion, surpassing analyst expectations of $2.76 billion.
Total net sales declined 1.9% compared to the same period last year. However, organic net sales showed strength with 2.4% growth, supported by a 1.9% improvement in pricing and product mix alongside a 0.5% increase in volume.
The Refrigerated & Frozen division emerged as a bright spot in the quarter. This segment achieved 3.6% organic net sales expansion, with volume climbing 3.9% as the company successfully recaptured market share that had been lost during supply chain disruptions in the previous year.
The Grocery & Snacks division delivered 1.8% organic net sales growth, while the Foodservice segment recorded a 3.6% increase.
CEO Sean Connolly expressed satisfaction with quarterly momentum. “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.
Strong volume performance was evident across frozen single-serve meals, frozen vegetables, meat snacks, and hot cocoa products.
Margin Compression Continues
Adjusted gross margin contracted by 112 basis points to settle at 23.7%. Despite improvements from higher organic sales volume and productivity initiatives, these gains were insufficient to counterbalance escalating input costs.
The company now anticipates cost of goods sold inflation will approach approximately 7% for the complete fiscal year, accounting for tariff-related impacts. Adjusted net income fell 22.3% to $188 million.
Third-quarter adjusted operating margin came in at 10.6%. Management projects the full-year operating margin will finish near the upper end of its 11.0%–11.5% guidance range.
Conservative Full-Year Outlook
Conagra revised its full-year adjusted EPS guidance to approximately $1.70, representing the lower boundary of its previously announced $1.70 to $1.85 range. While this adjustment signals caution, the company hasn’t issued a complete downward revision.
Management now anticipates annual net sales will land at the midpoint of its earlier projection, which encompassed a range from a 1% decrease to a 1% increase.
Escalating input costs continue to challenge the business. Conagra had implemented pricing strategies to counterbalance rising expenses for ingredients including cocoa, olive oil, and palm oil, along with tariffs affecting tin-plate steel.
Cost-conscious shoppers reducing discretionary spending and gravitating toward value-oriented private label alternatives have complicated pricing strategies. Additionally, the growing trend toward healthier eating habits, partially fueled by increased adoption of weight-loss medications, has created headwinds for traditional packaged food manufacturers.
Full-year cost of goods sold inflation, encompassing tariff impacts, is projected to reach approximately 7%.
