Conagra Brands Earnings: Inflation and Tariffs Weigh on FY25 Performance
- Hardik Shah
- Jul 10
- 3 min read
TLDR
Volume vs. Margin Trade-Off: Conagra prioritized long-term brand health over near-term margins, investing in frozen and snack categories despite inflation.
FY25 EPS Falls, FY26 Guide Down: Adjusted EPS declined 13.9% to $2.30; FY26 guidance cut to $1.70–$1.85 amid cost pressures.
Tariffs and Protein Costs Surge: Core inflation expected at 4%, with total cost of goods inflation reaching ~7% in FY26 due to animal proteins and tariffs.
Business Overview
Conagra Brands (NYSE: CAG) is one of North America’s leading branded food companies, with a diverse portfolio including iconic names like Birds Eye, Healthy Choice, Marie Callender’s, and Slim Jim. The company operates across four core segments: Grocery & Snacks, Refrigerated & Frozen, International, and Foodservice. Its primary focus is on frozen and snack categories, which are seen as long-term growth drivers.
Conagra Brands Earnings Q4 FY25
(Thirteen Weeks Ended May 25, 2025)
Net Sales: $2.78B (↓4.3% YoY); Organic net sales ↓3.5%
Adjusted Operating Margin: 13.8% (↓from 15.7% YoY)
Adjusted EPS: $0.56 (↓8.2%)
Adjusted EBITDA: $544M
Free Cash Flow (Full Year): $1.3B (↓18.8%)
Full Year FY25
Net Sales: $11.6B (↓3.6%)
Adjusted Operating Margin: 14.1% (↓188 bps)
Adjusted EPS: $2.30 (↓13.9%)
Net Income: $1.15B (↑231.9% due to lapping impairment charges)
Forward Guidance FY26
Organic Net Sales Growth: (1%) to +1%
Adjusted EPS: $1.70–$1.85
Operating Margin: ~11.0–11.5%
Total COGS Inflation: ~7% (4% core + 3% tariffs)
CapEx: $450M
Free Cash Flow Conversion: ~90%
Equity Method Earnings (Ardent Mills): ~$200M
CFO Dave Marberger: “We are investing in the business, paying down $700 million in debt, and still funding the dividend. We’re confident in our cash management.”
Operational Performance
Despite supply chain disruptions in H2 FY25, Conagra achieved:
Volume share gains in frozen desserts, whipped toppings, and snacks
98% service levels by Q4, setting the stage for a recovery in FY26
Investments in chicken manufacturing expected to alleviate third-party production costs by FY27
CEO Sean Connolly: “This is a transition year. We are doubling down on frozen and snacks to restore volume growth and set up margin expansion in fiscal 2027.”
Market Insights
Consumer Behavior: Increasing value-seeking behavior; elasticity stable at ~-1.0 for canned goods
Category Dynamics: Premium snacks and frozen meals remain resilient; vegetables see trade-down risk
Macroeconomic Trends: Inflation has persisted six straight years; tariffs on tinplate steel and animal protein costs are pressuring margins
Strategic Initiatives
Portfolio Simplification: Divestitures include Chef Boyardee, fish business, and India JV
Frozen/Snacks Focus: Continued innovation, marketing investment, and retail partnerships
AI-Led Cost Optimization: Early-stage initiatives to reengineer operations and accelerate efficiencies
Connolly: “Our new initiative to reengineer core work using AI will be a key margin lever going forward.”
Capital Allocation
Dividend: Maintained at $0.35/share quarterly ($1.40 annualized)
Debt Repayment: Targeting $700M reduction in FY26
Leverage: Ended FY25 at 3.6x net leverage; FY26 goal ~3.85x
Share Buybacks: $64M repurchased in FY25
The Bottom Line
Conagra Brands delivered a mixed FY25, hit by inflation, foreign exchange, and supply constraints. Still, its proactive investment in frozen and snacks—along with strategic divestitures—signals confidence in long-term brand health. FY26 will be a margin-reset year, but management expects a strong rebound in FY27 through productivity, pricing, and cost discipline.
Investors should watch for:
Margin trajectory in frozen/snacks
Impact of tariffs on COGS
Effectiveness of AI-driven cost restructuring
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