EPS of $0.54 increased by 145.8% from previous year
Gross margin of 25.4%
Net income of 256.00M
""We believe that healthy volumes are key at this point to long-term value creation..." - Sean Connolly, CEO" - Sean Connolly
Conagra Brands Inc (CAG) Q4 2025 Results: Navigating Inflation and Focused on Volume Growth
Executive Summary
In Q4 of fiscal 2025, Conagra Brands Inc (CAG) reported total revenue of $2.781 billion, representing a 4.27% year-over-year decline and a 2.08% decrease from the previous quarter. However, net income exhibited a remarkable recovery, increasing 145.13% year-over-year to $256 million, with a diluted earnings per share (EPS) of $0.54. CEO Sean Connolly emphasized the company's strategic pivot towards driving volume growth despite ongoing supply constraints and persistent inflation—factors that have historically impacted margins. The company is focused on targeted investments in key segments, particularly in frozen and snacks, where it anticipates long-term value creation despite the pressures of inflation and cost increases.
Conagra’s financial performance has shown resilience in net income despite a drop in revenue, highlighting effective cost management and a return to positive sales growth in strategic areas after prior investments initiated in fiscal 2024. The significant margin recovery indicates the company's adaptive measures toward managing inflation costs while positioning for future growth amidst a changing competitive environment.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.78B
-4.27%
-2.08%
Gross Profit
707.20M
-12.14%
-0.44%
Operating Income
321.00M
157.72%
20.41%
Net Income
256.00M
145.13%
76.43%
EPS
0.54
145.76%
80.00%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Strategic Insights from Management:
- Investment Focus: CEO Sean Connolly stated, "We believe that healthy volumes are key at this point to long-term value creation. So we are investing margin this year in the service of volume."
- Inflation Strategy: Connolly also highlighted that, "The above-average inflation cycle ... means this year is the sixth consecutive year of inflation above historical norms."
- Growth Predictions: Management sees productivity improvements of around 5% for fiscal 2026, aiming for long-term margin expansion post-investment: "We expect good margin expansion following fiscal 2026."
Management comments emphasize a long-term vision towards volume growth rather than short-term profit maximization, stating that strong brand connections are critical in maintaining future cash flows.
"We believe that healthy volumes are key at this point to long-term value creation..." - Sean Connolly, CEO
— Sean Connolly
"We're investing margin this year in the service of volume. But I do not see it as structural. We absolutely expect margin expansion going forward particularly in frozen..." - Sean Connolly, CEO
— Sean Connolly
Forward Guidance
For fiscal 2026, Conagra anticipates core inflation to be around 4%, driven extensively by high costs of animal proteins. Conversely, management forecasts a modest volume decline in FY2026 but sees potential recovery starting in FY2027 as supply chain investments pay off. Connolly noted, "We expect continued improvement in performance as we return to supply levels and invest in our core brands, enabling future margin recovery. Key factors to monitor include inflation trends and consumer demand responsiveness to pricing strategies."
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CAG Focus
25.42%
N/A
N/A
N/A
K
37.70%
17.00%
9.67%
19.18%
GIS
35.80%
16.50%
5.93%
17.34%
SJM
41.40%
18.40%
3.19%
12.44%
HRL
16.60%
9.38%
2.75%
19.28%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Conagra Brands is positioned to recover and grow, particularly in its strategic segments of frozen and snacks. With management's commitment to drive volume growth and expected margins to rebound following supply chain improvements, investors can anticipate a return to previous growth trajectories. Continued focus on product innovation and consumer engagement will be critical. CAG's ability to manage inflationary pressures effectively and respond to shifts in consumer demand will play a pivotal role in maintaining its market position.
Key Investment Factors
Growth Potential
Conagra Brands is positioned well within the consumer defensive sector, particularly in frozen and snacks where demand is expected to grow as consumer preferences evolve towards convenience and quality meals. The recent introduction of products like Banquet Mega Chicken Fillets illustrates the company's innovation strategy aimed at premiumizing their offers.
Profitability Risk
Continued high inflation rates, particularly for raw materials like protein sources and packaging, pose risks to overall profitability and may impact pricing strategies as consumers shift towards value purchasing. Elevated commodity costs could hinder margins further if not managed effectively.
Financial Position
With a net income recovery, CAG shows an overall strong financial position. Total assets stand at approximately $20.9 billion, with total liabilities of $12 billion. Positive cash flow from operating activities at $345 million indicates solid operational health.
SWOT Analysis
Strengths
Strong brand portfolio with popular consumer products across several food categories.
Resilient cash flow generation even amid broader market challenges.
Experience and capability in managing operational efficiencies.
Weaknesses
Declining top-line revenue in specific categories due to inflation and changing consumer tastes.
Heavy reliance on supply chain stability following substantial investments in manufacturing.
Opportunities
Potential for growth in the frozen and snacks sectors as consumers seek convenient meal solutions.
Room for margin improvement as supply chain investments yield results and inflation pressures recede.
Threats
Ongoing high inflation that exceeds prior expectations could lead to prolonged margin pressures.
Intense competition from both established brands and emerging private label products.