Important takeaways from Conagra Brands’ Q3 2025 report

Conagra Brands, Inc. (NYSE: CAG) has reported weaker-than-expected revenue and profit for the February quarter, with sales declining across all business segments amid softer demand and persistent supply challenges. The maker of popular food brands like Slim Jim and Healthy Choice also reaffirmed its full-year guidance, while cautioning that certain costs related to supply constraints would extend into the early months of the next fiscal year.

Stock Gains

Despite the mixed results, the Chicago-based packaged food company’s stock rose in Thursday’s premarket trading, soon after the announcement. Following a weak start to the year, CAG has traded below its 52-week average price so far. While the valuation appears relatively low, ongoing challenges like inventory depletion and supply chain issues may affect operational efficiency, which calls for a cautious investment approach.

In the third quarter, adjusted profit declined to $0.51 per share from $0.69 per share in the year-ago quarter. On a reported basis, net income was $145.1 million or $0.30 per share in Q3, compared to $308.6 million or $0.64 per share in the same period of 2024. The weak bottom-line performance reflects a 6.3% decline in net sales to $2.84 billion. Organic net sales dropped 5.2% year-over-year during the quarter.

Results Miss

Both sales and earnings missed Wall Street’s expectations, after beating in the prior quarter. In Q3, gross margin decreased by 331 basis points to 25.0%, and adjusted operating profit margin fell 369 basis points to 12.7%. Adjusted EBITDA declined about 19% YoY to $514 million during the quarter, mainly due to the dip in adjusted gross profit. Meanwhile, Conagra reduced its net debt by 5.9% to $8.1 billion.

Overall, performance was negatively impacted by supply chain disruptions, with the most affected areas being frozen meals and frozen vegetables. Price-conscious customers have been switching to cheaper private-label brands lately. Meanwhile, the company is reducing prices and making promotional offers to revive demand. Commenting on the results, Conagra’s CEO Sean Connolly said that the management is working to restore inventory and improve customer service to address supply constraints.

“Our third quarter unfolded largely as expected since our update in February at CAGNY, with strong consumption trends and share performance reflecting the continued resilience of our brands. While shipments lagged consumption largely due to the discrete supply constraints we announced in February, we are making solid progress in restoring inventory and improving customer service levels. We continue to monitor the dynamic external environment while remaining focused on execution, and our fiscal 2025 guidance remains unchanged at this time.“

FY25 Outlook

The Conagra leadership continues to expect organic net sales to decline approximately 2% annually in fiscal 2025. Full-year operating margin is expected to be around 14.4%, excluding one-off items. It is looking for adjusted earnings per share of approximately $2.35 for FY25. Free cash flow conversion for the year is estimated to be above 100%. Going forward, operational efficiency and profitability will depend on how consumer sentiment, inflation trends, and the government’s new trade policies evolve.

Extending the post-earnings momentum, Conagra’s shares traded higher in the early hours of Thursday’s session. The stock has lost around 9% in the past six months.