EPS of $0.30 decreased by 53.1% from previous year
Gross margin of 25.0%
Net income of 145.10M
""As I mentioned earlier, Q3 unfolded in a manner largely consistent with what we expected... there are things like vegetables that we import from Mexico that might become issues, but things are moving around. We need to see how the dust settles before we provide more specific guidance."" - Sean Connolly, CEO
Conagra Brands Inc (CAG) reported Q3 2025 results that reflected a challenging operating environment marked by persistent inflation and supply chain disruptions. Despite these headwinds, the company demonstrated solid consumer demand with total revenue of $2.84 billion, albeit a decrease of 6.33% year over year. Management noted a significant gap between shipments and consumption, particularly in the grocery segment, which they attributed to seasonal shipment variations and changing consumer behaviors. While operational issues impacted profitability, Conagra's strategic focus on brand investments and innovation positions them well for future recovery and growth as consumer sentiments stabilize.
Cash Flow Metrics:
- Net Cash Provided by Operating Activities: $592 million
- Free Cash Flow: $503.2 million
Balance Sheet Health:
- Total Assets: $20.74 billion
- Total Liabilities: $11.97 billion
- Stockholders' Equity: $8.78 billion
- Total Debt: $8.15 billion
- Current Ratio: 0.689, Quick Ratio: 0.235
Conagra’s financial health is strained by high leverage, coupled with the pressing need to manage costs in a volatile market.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.84B
-6.33%
-11.08%
Gross Profit
710.30M
-17.29%
-16.11%
Operating Income
266.60M
-43.45%
-33.78%
Net Income
145.10M
-52.98%
-49.00%
EPS
0.30
-53.13%
-50.00%
Key Financial Ratios
currentRatio
0.69
grossProfitMargin
25%
operatingProfitMargin
9.38%
netProfitMargin
5.11%
returnOnAssets
0.7%
returnOnEquity
1.65%
debtEquityRatio
0.93
operatingCashFlowPerShare
$1.24
freeCashFlowPerShare
$1.05
dividendPayoutRatio
115.2%
priceToBookRatio
1.41
priceEarningsRatio
21.27
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key Themes from Management:
- Market Dynamics: Sean Connolly, CEO, emphasized the resilience of consumer pull for their products despite a challenging macroeconomic landscape. "Consumer pull remains strong... inventories are being rebuilt, but some higher costs associated with supply chain constraints will linger into Q1."
- Sales Gaps: The divergence between shipments and consumption has been significant, as noted by Connolly, who explained, "This year, more of the seasonal shipments fell into Q2 compared to last year, impacting our grocery and snacks segment."
- Future Guidance: While specific forecasts for fiscal year 2026 were postponed, management indicated that ongoing inflation and consumer sentiment pose wildcards. "It's too early to give you an outlook at this juncture," Connolly mentioned, noting reliance on effective navigation of external pressures.
"As I mentioned earlier, Q3 unfolded in a manner largely consistent with what we expected... there are things like vegetables that we import from Mexico that might become issues, but things are moving around. We need to see how the dust settles before we provide more specific guidance."
— Sean Connolly, CEO
"We're really pleased with our cash flow performance... We expect the cash flow to continue to be strong and continue to pay down debt."
— Dave Marberger, CFO
Forward Guidance
Management remains cautious about fiscal 2026, indicating the need for volatility and macroeconomic stabilization before issuing specific targets. Key performance indicators moving forward include:
- Focus on improving inventory positions to support consumption recovery,
- Continued brand investment and marketing efforts despite inflation-related pricing pressures,
- Monitoring of external factors like tariffs and consumer sentiment as they can impact operational forecasts.
Management remains optimistic about fueling growth through strategic brand innovations and securing consumer loyalty.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CAG Focus
25.00%
9.38%
1.65%
21.27%
K
36.40%
14.10%
10.10%
18.87%
GIS
33.90%
18.40%
6.75%
13.55%
SJM
40.20%
-27.20%
-9.59%
-4.29%
HRL
16.80%
8.17%
2.25%
24.76%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given Conagra's resilient cash flows, strong market position, and ongoing innovation in key product categories, the company is positioned for potential rebound as inventory levels recover and inflation stabilizes. However, cautious monitoring of operational costs and competitive positioning will be important for maintaining profitability in an uncertain economic climate. While market risks persist, strategic brand management and a focus on consumer preferences may support positive long-term growth.
Key Investment Factors
Growth Potential
Strategies include brand investment, particularly in health-centric snack products, that leverage current consumer trends toward healthier eating. The integration of acquisitions such as Fatty meat sticks highlights efforts to capture growth in protein-rich snacking.
Profitability Risk
Ongoing inflationary pressures and supply chain disruptions pose significant risks. Furthermore, reduced grocery and snack segment performance amidst changing consumer preferences could impact revenue forecasts.
Financial Position
Despite a strong cash flow position, high debt levels (total debt of $8.15 billion) in the context of lower operating margins raise concerns about financial flexibility in the short term.
SWOT Analysis
Strengths
Strong brand portfolio including Birds Eye and Healthy Choice.
Solid cash flow generation with $592 million from operating activities.
Market leader in frozen food and snacking segments.
Weaknesses
High debt levels relative to equity and cash flow.
Declining revenue and profitability metrics in recent quarters.
Opportunities
Growing demand for healthier snacks provides avenues for product innovation.
Expansion into emerging markets, leveraging innovation in packaged foods.
Threats
Inflationary pressures can lead to increased costs and reduced consumer spending.
Supply chain disruptions could continue impacting product availability.
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