Conagra's Q2 Earnings Top Estimates, Organic Sales Decline 3%

Conagra Brands, Inc. CAG reported second-quarter fiscal 2026 results, wherein both earnings and sales declined year over year. Results reflected a challenging consumer environment, lower volumes and continued impacts from divestitures, partly offset by productivity gains and resilient performance across several growth categories.CAG’s Quarterly Performance: Key Metrics and InsightsConagra’s adjusted earnings per share (EPS) for the quarter were 45 cents, beating the Zacks Consensus Estimate of 44 cents. However, the bottom line declined 35.7% year over year, primarily reflecting lower adjusted operating profit.Conagra Brands Price, Consensus and EPS Surprise Conagra Brands price-consensus-eps-surprise-chart | Conagra Brands QuoteNet sales declined 6.8% year over year to $2,979.1 million, missing the Zacks Consensus Estimate of $2,990 million. The decline included a 3.9% headwind from M&A, a 3% decrease in organic net sales and a modest 0.1% favorable currency impact.Organic net sales fell 3% due to a 3% decline in volume, while price/mix remained flat. Management noted a roughly 100-basis-point headwind from retailer purchasing patterns and merchandising timing during the quarter. Despite volume pressure, Conagra gained volume share in multiple categories, including ready-to-eat popcorn, pudding, hot cocoa, seeds, refrigerated whipped toppings, frozen desserts and frozen breakfast items.Adjusted gross profit declined 17.1% to $698 million, as productivity gains were more than offset by lower sales, cost inflation and lost profit from divested businesses. Adjusted gross margin contracted 292 basis points to 23.4% from the year-ago period.Adjusted SG&A expenses, including advertising and promotional (A&P) costs, increased 2.9% year over year to $362 million, reflecting higher A&P investment. Adjusted EBITDA declined 25.2% to $478 million.Decoding CAG’s Segmental PerformanceGrocery & Snacks: Segment net sales declined 8.5% year over year to $1,209 million due to a 7.0% adverse M&A impact and a 1.5% fall in organic net sales. Organic results reflected a 0.8% benefit from price/mix, offset by a 2.3% decline in volume. Adjusted operating profit decreased 21.8% to $231 million.Refrigerated & Frozen: Net sales fell 6.5% to $1,251 million, reflecting a 5.1% drop in organic net sales and a 1.4% M&A headwind. Organic performance was adversely impacted by a 2.1% decline in price/mix and a 3.0% decrease in volume. Adjusted operating profit declined 35.6% to $128 million, as inflation and unfavorable operating leverage weighed on margins.International: International segment sales declined 5.4% year over year to $230 million, reflecting a 4.1% M&A impact, a 2.9% fall in organic net sales and a 1.6% favorable currency benefit. Organic results included a 3.5% increase in price/mix, offset by a 6.4% volume decline. Adjusted operating profit decreased 18.4% to $32 million.Foodservice: Foodservice sales decreased 1.3% to $288 million due to M&A impacts, partially offset by 0.2% organic net sales growth. Organic performance reflected a 4.2% benefit from price/mix, offset by a 4.0% volume decline. Adjusted operating profit fell 12.6% to $31 million.CAG’s Financial Health SnapshotIn the first half of fiscal 2026, Conagra generated net cash from operating activities of $331 million. Capital expenditures totaled $219 million, resulting in free cash flow of $113 million.CAG ended the second quarter with net debt of $7.6 billion. The company paid a dividend of 35 cents per share in the quarter.What to Expect From CAG in FY26?The company has reiterated its outlook for fiscal 2026, projecting organic net sales to range from a decline of 1% to growth of 1% versus fiscal 2025. Adjusted operating margin is expected to fall between 11% and 11.5%, while adjusted earnings per share are anticipated in the range of $1.70 to $1.85.Adjusted equity income for the fiscal year is now forecasted at about $170 million, down from the prior expectation of roughly $200 million. The outlook also factors in continued elevated inflation in the cost of goods sold during fiscal 2026, with core inflation expected to be slightly above 4%. In addition, the forecast incorporates the anticipated impact of previously announced U.S. tariffs. Although tariff conditions remain subject to change, assumptions include a 50% tariff on imported tin plate steel and aluminum, a 20% tariff on select imports from China and various reciprocal tariffs by country. Collectively, these measures are expected to raise the cost of goods sold by roughly 3% on an annual basis before mitigation efforts such as accelerated cost-saving programs, alternative sourcing strategies and selective pricing actions. Overall, the total cost of goods sold inflation is projected at approximately 7%.Shares of CAG have tumbled 34.3% in a year compared with the industry’s decline of 14%.Stocks to ConsiderUnited Natural Foods, Inc. UNFI distributes natural, organic, specialty, produce and conventional grocery and non-food products in the United States and Canada. At present, United Natural flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The consensus estimate for United Natural’s current fiscal-year sales and earnings implies growth of 1% and 187.3%, respectively, from the year-ago figures. UNFI delivered a trailing four-quarter earnings surprise of 52.1%, on average.Village Farms International, Inc. VFF produces, markets and distributes greenhouse-grown tomatoes, bell peppers, cucumbers and mini-cukes in North America. It sports a Zacks Rank #1. Village Farms delivered a trailing four-quarter earnings surprise of 155.6%, on average.The Zacks Consensus Estimate for Village Farms’ current fiscal-year earnings indicates growth of 165.6% from the prior-year levels.The Vita Coco Company, Inc. COCO develops, markets and distributes coconut water products under the Vita Coco brand name. COCO currently flaunts a Zacks Rank #1. Vita Coco delivered a trailing four-quarter earnings surprise of 30.4%, on average.The Zacks Consensus Estimate for Vita Coco's current fiscal-year sales and earnings implies growth of 18% and 15%, respectively, from the year-ago figures.Zacks' Research Chief Picks Stock Most Likely to "At Least Double"Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.See Our Top Stock to Double (Plus 4 Runners Up) >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Vita Coco Company, Inc. (COCO): Free Stock Analysis Report Conagra Brands (CAG): Free Stock Analysis Report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report Village Farms International, Inc. (VFF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks