Conagra Brands Inc. (NYSE:CAG) turned in results that beat Wall Street’s low bar, even as sales and profits slipped.
The food giant reaffirmed its full-year outlook, betting on pricing power and steadier supply chains to offset rising costs.
But with tariffs and protein inflation tightening the squeeze, Conagra’s near-term path looks choppy, setting the stage for a high-stakes test in the back half of the year.
Also Read: Conagra Reaffirms Outlook Even As Tariffs Add To Inflation
The company reported fiscal first-quarter 2026 revenue of $2.63 billion, a 5.8% decline from the prior year, while adjusted EPS dropped 26.4% to 39 cents. Results still exceeded expectations due to trade expense timing and favorable mix effects.
Management reaffirmed guidance for organic net sales between –1% and +1%, operating margins of 11.0%–11.5%, and EPS of $1.70–$1.85.
Conagra also cautioned that tariffs could add about 3% to costs, pushing overall inflation into the low-7% range.
Bank of America analyst Peter T. Galbo maintained an Underperform rating and a $18 price forecast, which he values at 10x his calendar year 2026 EPS estimate. He kept his fiscal 2026 adjusted EPS forecast at $1.75, toward the low end of Conagra’s guidance.
Galbo argued that the first-quarter beat came from temporary benefits that will unwind in the second quarter. He pointed to trade accrual reversals, higher protein and chicken costs, and tariff pressures as reasons margins could fall below the 11% to 11.5% range.
He also cautioned that merchandising shifts for Marie Callender’s frozen meals distort comparisons and pose risks to near-term results.
RBC Capital analyst Nik Modi reiterated a Sector Perform rating and a $22 price forecast, underpinned by his fiscal 2026 EPS forecast of $1.73 and a DCF valuation that assumes a 1% revenue CAGR, peak margins of about 13%, and a WACC of 7%.
Modi slightly reduced his estimate to $1.73 from $1.74, but highlighted that organic sales fell by just 0.6%, better than the consensus of –1.9%. Even excluding a 50-basis-point trade timing benefit, sales declined 1.1%, which was still ahead of expectations.
Modi pointed to improved service levels, now back at 98%, and share gains across 44% of the portfolio as positives. He cautioned, however, that consumer weakness and higher protein costs remain headwinds for the company’s growth acceleration in the second half.
Outlook Reaffirmed, But Headwinds Persist
While Conagra reaffirmed its guidance, both analysts warned that inflationary costs, tariffs, and the reversal of early-quarter benefits pose challenges.
Galbo expressed concern over the company’s dividend payout ratio, which is projected near 80% versus its target of 50%-55%.
Modi noted that Conagra must show consistent volume recovery and productivity improvements to build confidence in longer-term margin goals.
With valuations split between $18 on the bearish side and $22 on the more neutral side, investors will focus on whether Conagra can stabilize volumes, manage costs, and deliver in frozen and snack categories to sustain its guidance.
Conagra beat modest expectations, but the road ahead hinges on balancing cost inflation, tariffs, and consumer softness against supply chain gains and pricing power.
Price Action: CAG shares were trading 1.24% lower at $19.05 at last check Thursday.
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