Conagra Brands (CAG) Q1 2027 (Q&A) earnings summary

Executive summary

• Q1 2027 saw net sales decline 1.4% year-over-year to $2.60 billion, with organic net sales down 1.1% and decreases in Grocery & Snacks and Refrigerated & Frozen offset by gains in International and Foodservice.

• Adjusted EPS rose 5.1% to $0.41, while diluted EPS increased 5.9% to $0.36, reflecting higher equity method investment earnings and lower income tax expense.

• Adjusted operating margin was 11.5%, with reported operating margin at 10.3%.

• Brand investment and productivity initiatives are underway, with a focus on margin restoration, capital allocation, and increased A&P spend.

• Q1 results exceeded expectations due to favorable SG&A timing, lower inflation, Ardent Mills benefit, and a tariff refund.

Financial highlights

• Net sales: $2.60 billion, down 1.4% year-over-year; organic net sales: $2,591 million, down 1.1%.

• Adjusted gross margin: 23.8% (down 62 bps year-over-year); gross profit: $618.7 million.

• Adjusted operating margin: 11.5% (down 33 bps year-over-year); operating profit: $268.4 million.

• Adjusted EPS: $0.41 (up 5.1% year-over-year); diluted EPS: $0.36 (up 5.9%).

• Free cash flow: ($128) million, down $102 million year-over-year, impacted by litigation payments and lower profits.

Outlook and guidance

• Fiscal 2027 guidance reaffirmed: organic net sales change of (3)% to (1)% vs. FY26.

• Adjusted operating margin expected between 10.0% and 10.5%; adjusted EPS projected at $1.40 to $1.50.

• Q2 organic net sales projected to decline ~2%, with higher logistics and A&P spend; additional targeted price increases expected by end of H1 2027.

• Key assumptions: equity earnings ~$140 million, pension income ~$25 million, interest expense ~$360 million, capex ~$550 million, free cash flow conversion >90%, net leverage ratio ~4.0x.

• Management anticipates continued consumer sensitivity to price increases may negatively impact volumes.