Conagra Brands, Inc. (NYSE: CAG), a leading provider of consumer packaged goods, reported weaker-than-expected sales and adjusted earnings for its fourth quarter, reflecting ongoing economic uncertainty and muted consumer spending. Citing expectations that these headwinds will persist, the management issued fiscal 2026 guidance that falls short of Wall Street estimates.
The company’s stock dropped soon after the announcement on Thursday as the market reacted negatively to the unimpressive results and weak outlook. CAG has traded below its 52-week average over the past three months. The stock has been on a losing streak for quite some time, and is currently trading near a six-year low. It is one of the worst-performing stocks in the segment.
Sales Drop
In the final three months of fiscal 2025, Conagra’s adjusted earnings declined to $0.56 per share from $0.61 per share in the year-ago quarter, missing analysts’ forecasts. The weak bottom-line performance reflects a 3.5% fall in organic net sales. Net sales were $2.78 billion in the May quarter, lower than $2.91 billion reported in Q4 2024 and below Wall Street’s expectations.
On an unadjusted basis, the company reported net income of $256 million or $0.53 per share for the fourth quarter, compared to a loss of $567.3 million or $1.18 per share in the same period of 2024. The Conagra leadership said that performance in the second half of the year was negatively impacted by elevated inflation, foreign exchange headwinds, and supply constraints.
Guidance
Looking ahead, the company expects organic net sales to be down 1% to up 1% in fiscal 2026, compared to fiscal 2025. Adjusted operating margin is expected to be between 11.0% and 11.5% in FY26. The management is looking for adjusted earnings per share in the range of $1.70 to $1.85. The earnings and topline forecasts are below analysts’ consensus estimates. The cautious outlook reflects continued inflationary pressure and a potential cost escalation linked to the new import tariffs.
Conagra’s CEO Sean Connolly said at the Q4 earnings call, “…in terms of elasticity as planned, within our categories, Conagra’s average elasticity is a little bit lower than our competitors across channels. And, further at a company level, if you look at total pricing versus total volume change, you’ll also see that the elasticity has been a touch better than most peers over the last year. So we’ve baked in for our grocery business what would be for us a fairly standard elasticity, basically close to a minus one for that business. And as for the decision to take price on that business, we actually are very thoughtful in our pricing approach based on the strategy for the business.”
Pricing Woes
The company has struggled to maintain volumes in recent quarters, mainly reflecting subdued demand due to higher costs of frozen food items like chicken and beef, a trend that is expected to stay in the coming months. As consumers remain cautious in their spending, Conagra faces continued pricing pressure, resulting in weak margin performance.
Extending the post-earnings downturn, shares of Conagra traded lower mostly during Thursday’s regular session. The value has nearly halved in the past two years.
