Conagra Brands, Inc. (NYSE: CAG) reported revenue and profits exceeded expectations for the February quarter, with sales falling across all business segments amid softer demand and softer supply challenges. Manufacturers of popular food brands like Slim gym and Healthy choices They also reaffirmed the full year guidance, but warned that certain costs associated with supply constraints would extend into the early months of the following fiscal year.
Inventory profit
Despite mixed results, shares in Chicago-based Package Food Company rose in pre-market trading on Thursday shortly after the announcement. Following this weak start, CAG has so far below the 52-week average price. Although the ratings appear to be relatively low, continuing challenges such as stock exhaustion and supply chain issues can affect operational efficiency, which requires a careful investment approach.
In the third quarter, adjusted earnings fell to $0.51 per share from $0.69 per share in the same period last year. On a reported basis, net income was $151 million or $0.30 in the third quarter, compared to $38.6 million or $0.64 per share for the same period in 2024. The weak performance of the bottom line is down 6.3% to $2.84 billion. Organic net sales fell 5.2% year-on-year during the quarter.
The results are missed
After breaking it in the last quarter, both sales and revenue missed Wall Street expectations. In Q3, the total margin fell 331 basis points to 25.0%, and the adjusted operating margin fell 369 basis points to 12.7%. Adjusted EBITDA fell by about 19% over the quarter to $514 million year-on-year, primarily due to a reduced gross profit. Meanwhile, Conagra cut its net debt by 5.9% to $8.1 billion.
Overall, performance was negatively affected by supply chain disruptions. Frozen meals and Frozen vegetables. Price-sensitive customers have recently switched to cheaper private label brands. Meanwhile, the company has made promotional offers to lower prices and revive demand. Commenting on the results, Conagra CEO Sean Connolly said management is working to restore inventory and improve customer service and address supply constraints.
“Our third quarter has unfolded as expected with strong consumer trends and shared performance that reflect the brand’s continued resilience since its update at CAGNY in February. It has not changed at this time.“
FY25 Outlook
Conagra’s leadership expects organic net sales to decline by approximately 2% per year in 2025. The year-round operating margin is expected to be approximately 14.4% excluding one-time items. We are looking for adjusted earnings per share of approximately $2.35 for fiscal year 2023. Free cash flow conversions for the year are estimated to exceed 100%. Going forward, operational efficiency and profitability will depend on consumer sentiment, inflation trends, and how governments’ new trade policies evolve.
Conagra stock traded higher early in Thursday’s session, extending its post-revenue momentum. Stock prices have fallen by about 9% over the past six months.
