Conagra (CAG)

Packaged foods company Conagra Brands (NYSE:CAG) beat Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 5.8% year on year to $2.63 billion. Its GAAP profit of $0.34 per share was in line with analysts’ consensus estimates.

Company Overview

Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE:CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Competitors with a broad packaged and frozen foods portfolio include Kraft Heinz (NASDAQ:KHC), General Mills (NYSE:GIS), and Kellogg's (NYSE:K).

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years.

With $11.45 billion in revenue over the past 12 months, Conagra is one of the larger consumer staples companies and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because there are only a finite number of major retail partners, placing a ceiling on its growth. To accelerate sales, Conagra likely needs to optimize its pricing or lean into new products and international expansion.

As you can see below, Conagra struggled to increase demand as its $11.45 billion of sales for the trailing 12 months was close to its revenue three years ago. This is mainly because consumers bought less of its products - we’ll explore what this means in the "Volume Growth" section.

This quarter, Conagra’s revenue fell by 5.8% year on year to $2.63 billion but beat Wall Street’s estimates by 0.7%.

Looking ahead, sell-side analysts expect revenue to decline by 2% over the next 12 months, similar to its three-year rate. This projection is underwhelming and implies its products will face some demand challenges.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Conagra generated its growth (or lack thereof) from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Conagra’s average quarterly volumes have shrunk by 1.8%. This isn’t ideal for a consumer staples company, where demand is typically stable. In the context of its 2.6% average organic sales declines, we can see that most of the company’s losses have come from fewer customers purchasing its products.

In Conagra’s Q3 2026, sales volumes dropped 1.2% year on year. This result represents a further deceleration from its historical levels, showing the business is struggling to move its products.

Conagra has bad unit economics for a consumer staples company, giving it less room to reinvest and develop new products. As you can see below, it averaged a 26.3% gross margin over the last two years. That means Conagra paid its suppliers a lot of money ($73.68 for every $100 in revenue) to run its business.

This quarter, Conagra’s gross profit margin was 24.3%, down 2.2 percentage points year on year but still exceeding analysts’ estimates by 6.6%. Conagra’s full-year margin has also been trending down over the past 12 months, decreasing by 1.9 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Conagra has done a decent job managing its cost base over the last two years. The company has produced an average operating margin of 8.9%, higher than the broader consumer staples sector.

Looking at the trend in its profitability, Conagra’s operating margin rose by 5 percentage points over the last year, showing its efficiency has meaningfully improved.

In Q3, Conagra generated an operating margin profit margin of 13.2%, down 1.2 percentage points year on year. Since Conagra’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, and administrative overhead expenses.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

In Q3, Conagra reported EPS of $0.34, down from $0.97 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 1.5%. Over the next 12 months, Wall Street expects Conagra’s full-year EPS of $1.76 to grow 3.4%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Conagra has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 11.1% over the last two years, quite impressive for a consumer staples business.

Taking a step back, we can see that Conagra’s margin dropped by 2.3 percentage points over the last year. This decrease warrants extra caution because Conagra failed to grow its revenue organically. Its cash profitability could decay further if it tries to reignite growth through investments.

Conagra broke even from a free cash flow perspective in Q3. The company’s cash profitability regressed as it was 5.8 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Conagra historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.2%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.

Conagra reported $698.1 million of cash and $8.28 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.97 billion of EBITDA over the last 12 months, we view Conagra’s 3.9× net-debt-to-EBITDA ratio as safe. We also see its $217.1 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We liked that Conagra beat analysts’ organic revenue growth and gross margin expectations this quarter. On the other hand, EPS was just in line. Overall, we still think this was a decent quarter with some key metrics above expectations. The stock traded up 2.4% to $18.71 immediately after reporting.

Updated: December 4, 2025 at 9:49 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Conagra.

Conagra falls short of our quality standards. For starters, its revenue has declined over the last three years, and analysts expect its demand to deteriorate over the next 12 months. And while its expanding operating margin shows the business has become more efficient, the downside is its projected EPS for the next year is lacking. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Conagra’s P/E ratio based on the next 12 months is 9.7x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $20.22 on the company (compared to the current share price of $17.01).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.