Conagra Brands, Inc. (CAG Quick QuoteCAG - Free Report) reported third-quarter fiscal 2026 results, wherein the top and bottom lines declined year over year, and earnings missed the Zacks Consensus Estimate despite the company posting organic sales growth. 

Results reflected improving volume trends, particularly in frozen and snacks categories, partly offset by inflationary pressures, divestiture impacts and margin contraction. Conagra narrowed its guidance for fiscal 2026.

CAG’s Quarterly Performance: Key Metrics and Insights

Conagra’s adjusted earnings per share (EPS) for the quarter were 39 cents, missing the Zacks Consensus Estimate of 40 cents. The bottom line dropped 23.5% year over year, primarily due to lower adjusted gross profit and continued cost inflation pressures.

Conagra Brands Price, Consensus and EPS Surprise

Conagra Brands price-consensus-eps-surprise-chart | Conagra Brands Quote

Net sales decreased 1.9% year over year to $2,787.8 million, but came in slightly above the Zacks Consensus Estimate of $2,767 million. The decline reflected a 4.8% headwind from M&A, partly offset by a 2.4% increase in organic net sales and a 0.5% favorable currency impact.

Organic net sales rose 2.4%, backed by a 1.9% improvement in price/mix and a 0.5% rise in volumes. Management highlighted gains in volume share across categories such as frozen meals, vegetables, snacks, hot cocoa, seeds and pudding. Our model suggested organic sales would increase 1.2% in the third quarter.

Adjusted gross profit declined 6.3% to $660 million, while adjusted gross margin contracted 112 basis points to 23.7%, as productivity gains were more than offset by inflation, unfavorable operating leverage and divestiture-related impacts. Our model projected adjusted gross margin contraction of about 160 basis points to 23.2%. 

Adjusted SG&A expenses increased 6.4% to $364 million, reflecting higher advertising and promotional investments. Adjusted EBITDA declined 14.9% to $437 million.

Decoding CAG’s Segmental Performance

Grocery & Snacks: Net sales declined 6.3% year over year to about $1.2 billion due to an 8.1% M&A headwind, partly offset by 1.8% organic growth. Organic sales benefited from a 4% price/mix increase, offset by a 2.2% volume decline. Adjusted operating profit fell 10.6% to $217 million. We had expected segment volumes to fall 2.4% while expecting a 2.8% pricing gain. 

Refrigerated & Frozen: Net sales increased 1.6% to $1.1 billion, driven by 3.6% organic growth and a 2% M&A drag. Organic growth was supported by a 3.9% volume increase, partially offset by a 0.3% decline in price/mix. Adjusted operating profit decreased 15.4% to $105 million.

International: Sales jumped 1.3% to $227 million, supported by favorable currency, partly offset by a 1.2% organic decline and a 4.3% adverse impact from M&A. Organic performance included a 0.8% price/mix gain and a 2% volume decline. Adjusted operating profit slipped 5.4% to $32 million.

Foodservice: Net sales rose 1.8% to $261 million, reflecting 3.6% organic growth and a 1.8% M&A headwind. Organic growth was driven by a 3.7% price/mix increase, with volumes down 0.1%. Adjusted operating profit declined 9.2% to $26 million.

CAG’s Financial Health

For the first nine months of fiscal 2026, Conagra generated net cash from operating activities of $896 million. Capital expenditures totaled $314 million, resulting in free cash flow of $581 million. 

The company ended the quarter with net debt of approximately $7.3 billion, reflecting a year-over-year reduction and a net leverage ratio of 3.83. Conagra paid a quarterly dividend of 35 cents per share.

What to Expect From CAG in FY26?

Conagra narrowed its fiscal 2026 outlook, now expecting organic net sales to be near the midpoint of its previously guided range of a 1% decline to 1% growth compared with fiscal 2025. 

The company anticipates adjusted operating margin to be near the high end of its earlier projection of approximately 11% to 11.5%, while adjusted EPS is expected to be around $1.70, which is at the low end of the prior $1.70-$1.85 range.

Adjusted equity earnings are now projected at roughly $140 million, lower than the earlier estimate of about $170 million. Management also expects free cash flow conversion of approximately 105% for the year. The outlook continues to factor in elevated cost inflation of around 7%, including tariff-related impacts, partially mitigated by productivity initiatives, pricing actions and supply-chain adjustments.

Shares of CAG have tumbled 40.4% in a year compared with the industry’s decline of 28%.

Stocks to Consider

The Hershey Company (HSY Quick QuoteHSY - Free Report) engages in the manufacture and sale of confectionery products and pantry items in the United States and internationally. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Hershey’s current financial-year sales and earnings indicates growth of 4.8% and 30.1%, respectively, from the prior-year reported levels. HSY delivered a trailing four-quarter earnings surprise of 17.2%, on average.

Mama's Creations, Inc. (MAMA Quick QuoteMAMA - Free Report) manufactures and markets fresh deli-prepared foods in the United States. At present, MAMA sports a Zacks Rank of 1. Mama's Creations delivered a trailing four-quarter earnings surprise of 133.3%, on average.

The consensus estimate for Mama's Creations’ current fiscal-year sales and earnings implies growth of 39.9% and 44.4%, respectively, from the year-ago figures. 

US Foods Holding Corp. (USFD Quick QuoteUSFD - Free Report) engages in the marketing, sale and distribution of fresh, frozen and dry food and non-food products to foodservice customers in the United States. USFD currently carries a Zacks Rank #2 (Buy). US Foods Holding delivered a trailing four-quarter earnings surprise of 2.2%, on average.

The Zacks Consensus Estimate for US Foods Holding’s current fiscal-year sales and earnings calls for growth of 5.4% and 20.9%, respectively, from the year-ago figures.