Conagra’s sales return to growth, but profit drops as costs bite

Conagra Brands is finally seeing shoppers put more of its food into their carts again. Making money on those sales is proving tougher.

Sales recover, earnings weaken

In a quarterly report filed with the Securities and Exchange Commission on April 1, the Chicago-based packaged-food company said organic net sales rose 2.4% in its fiscal third quarter, which ended Feb. 22. The gain marked a return to growth after earlier declines, helped by stronger demand for frozen meals and snacks.

But adjusted earnings per share fell 23.5% from a year earlier, and key profitability metrics weakened, underscoring the squeeze large food manufacturers face as they juggle inflation, changing consumer habits and sizable debt loads.

The Form 8-K, signed by Executive Vice President and General Counsel Carey Bartell, furnished Conagra’s earnings release under Item 2.02, “Results of Operations and Financial Condition.” The document highlights a company leaning on cash generation and debt reduction while narrowing its full-year outlook to the low end of prior earnings guidance.

Headline numbers

Conagra reported net sales of $2.8 billion, down 1.9% on a reported basis from the same period a year earlier. The decline reflects a 4.8-percentage-point drag from divestitures, including the earlier sale of legacy canned brands, partly offset by organic growth and a small foreign exchange benefit.

Price increases and product mix accounted for 1.9 percentage points of organic growth, while volumes grew 0.5 percentage point overall—suggesting Conagra is not relying solely on price to lift sales. However, the company said its cost of goods sold remains under pressure, with inflation, including tariffs, expected to run about 7% for the full 2026 fiscal year.

On a generally accepted accounting principles basis, net income attributable to Conagra rose 37.7% to $200 million, and diluted EPS increased to 42 cents from 30 cents a year earlier. The company said the GAAP improvement largely reflected favorable tax items this year and the absence of large legal and impairment charges that weighed on results in the prior-year quarter.

Conagra estimated that unusual tax items contributed about 7 cents per share to this year’s earnings. Those gains more than offset roughly 5 cents per share in current-quarter expenses tied to restructuring, a loss on the sale of a business and environmental matters. By contrast, the year-ago quarter included about 15 cents per share of legal costs and 5 cents per share from impairment of a business held for sale.

Excluding those items, the underlying picture was weaker. Adjusted net income fell 22.3% to $188 million, and adjusted EPS dropped to 39 cents from 51 cents. Adjusted operating margin came in at 10.6%, and adjusted EBITDA declined 14.9% to $437 million.

“We are pleased with our third quarter performance as we returned the business to organic net sales growth,” President and CEO Sean Connolly said in the earnings release, pointing to “continued upward inflection in our Frozen and Snacks businesses.”

Segment results: strength in frozen, pressure elsewhere

The segment results show where demand is improving—and where profitability remains under strain.

Grocery & Snacks

In Grocery & Snacks, which includes Slim Jim and Duncan Hines, reported net sales fell 6.3% to $1.2 billion. Divestitures reduced sales growth by 8.1 percentage points, while organic net sales rose 1.8%. Price and mix were up 4%, while volumes declined 2.2%, consistent with consumers pulling back in response to higher prices.

Operating profit in the segment fell 10.4% on a reported basis and 10.6% on an adjusted basis, reflecting inflation, lower volumes and the impact of divestitures.

Refrigerated & Frozen

Refrigerated & Frozen—home to Birds Eye, Healthy Choice and Marie Callender’s—reported net sales of $1.1 billion, up 1.6%. Organic net sales grew 3.6%, with volumes up 3.9% and price/mix down 0.3%. Conagra said the volume gain reflected recovery in market share after prior-year supply constraints and continued demand for frozen meals and snacks.

Despite the top-line improvement, adjusted operating profit in the segment declined 15.4% due to higher input costs, less favorable operating leverage, increased advertising and divestiture impacts.

International and Foodservice

International net sales rose 1.3% on a reported basis, but organic net sales slipped 1.2%, with volume down 2%.

Foodservice reported net sales increased 1.8% and organic growth was 3.6%, though operating profit fell 9.2% amid inflation and portfolio changes.

Joint venture earnings and cash flow soften

Below the operating line, earnings from equity-method investments also weakened. Income from Conagra’s stake in Ardent Mills, a flour-milling joint venture, fell nearly 23% in the quarter.

Conagra cut its full-year forecast for adjusted equity earnings to about $140 million, from a previous estimate of roughly $170 million, citing weaker commodity trading income.

The profit declines contributed to a drop in cash generation. For the first nine months of the fiscal year, net cash provided by operating activities was $896 million, down from $1.35 billion a year earlier. Free cash flow was $581 million, down $461 million year over year. The company attributed the decline to lower operating profit and the benefit of accelerated receivables collections in the prior year that did not repeat.

Debt reduction remains a focus

Conagra emphasized balance-sheet progress. The company ended the quarter with net debt of $7.3 billion, down $818 million (about 10.1%) from a year earlier. It reported a net leverage ratio of 3.83 times.

Connolly said Conagra is “over-delivering against our free cash flow conversion and debt reduction projections,” while the company continued to return cash to shareholders. Conagra paid a quarterly dividend of 35 cents per share during the period, totaling about $502 million for the first three quarters of the fiscal year.

Guidance: EPS to land at low end

With less than three months remaining in its 2026 fiscal year, Conagra narrowed its full-year guidance but kept its original ranges largely intact.

• Organic net sales are expected to finish near the midpoint of prior guidance (between a 1% decline and a 1% increase versus fiscal 2025).
• Adjusted operating margin is projected near the high end of the 11% to 11.5% range.
• Adjusted EPS is now expected to be approximately $1.70, the low end of the earlier $1.70 to $1.85 forecast.

The company also trimmed expected interest expense to about $385 million (from roughly $390 million) and raised projected free cash flow conversion to about 105% (from 100%).

Conagra’s release devoted significant space to non-GAAP measures—adjusted EPS, organic net sales, free cash flow and net debt—and reiterated that these metrics are intended to supplement, not replace, GAAP results.

Risks and market reaction

The company cautioned that future results could be affected by inflation and tariffs, supply chain disruptions, shifting consumer preferences, product liability and recall risks, evolving ESG regulation, cybersecurity threats, labor conditions and its ability to reduce leverage on schedule.

Investors reacted cautiously. Conagra shares traded around $15.50 on April 1, down about 1% in afternoon trading, valuing the company at roughly $8.5 billion. Analysts characterized the quarter as mixed: organic sales growth and debt reduction were positives, while margins, joint venture earnings and adjusted profit were weaker than expected.

What comes next

The coming quarters will test whether Conagra can turn its renewed sales momentum—particularly in frozen foods and snacks—into stronger, more durable earnings. With costs still elevated and consumers sensitive to price increases, the company faces pressure to prove that its reshaped portfolio can support not just America’s weeknight dinners, but its own balance sheet as well.