Conagra (NYSE:CAG) Exceeds Q4 Expectations

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Packaged foods company Conagra Brands (NYSE:CAG) reported Q4 CY2024 results topping the market’s revenue expectations, but sales were flat year on year at $3.20 billion. Its non-GAAP profit of $0.70 per share was 3.9% above analysts’ consensus estimates.

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Conagra (CAG) Q4 CY2024 Highlights:

• Revenue: $3.20 billion vs analyst estimates of $3.15 billion (flat year on year, 1.5% beat)
• Adjusted EPS: $0.70 vs analyst estimates of $0.67 (3.9% beat)
• Management lowered its full-year Adjusted EPS guidance to $2.48 at the midpoint, a 5.7% decrease
• Operating Margin: 12.6%, down from 14% in the same quarter last year
• Free Cash Flow Margin: 12.6%, up from 10.6% in the same quarter last year
• Organic Revenue was flat year on year (-3.4% in the same quarter last year)
• Sales Volumes were flat year on year (-2.9% in the same quarter last year)
• Market Capitalization: $13.06 billion

Sean Connolly, president and chief executive officer of Conagra Brands, commented, "Our business returned to growth in the second quarter despite a continued challenging consumer environment as our investments paid off, driving strong market share performance. While momentum remains strong, we expect the business to be impacted by two headwinds in the back half including higher than expected inflation and unfavorable foreign exchange rates, leading us to update our fiscal 2025 outlook."

Company OverviewFounded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE:CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.

Shelf-Stable Food

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Sales Growth

A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

Conagra is one of the larger consumer staples companies and benefits from a well-known brand that influences consumer purchasing decisions. However, its scale is a double-edged sword because it's harder to find incremental growth when your existing brands have penetrated most of the market. To accelerate sales, Conagra must lean into newer products.

As you can see below, Conagra’s sales grew at a sluggish 2.1% compounded annual growth rate over the last three years as consumers bought less of its products. We’ll explore what this means in the "Volume Growth" section.

This quarter, Conagra’s $3.20 billion of revenue was flat year on year but beat Wall Street’s estimates by 1.5%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a slight deceleration versus the last three years. This projection is underwhelming and implies its products will see some demand headwinds.

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Volume Growth

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Conagra generated its growth (or lack thereof) from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Conagra’s average quarterly sales volumes have shrunk by 2%. This isn’t ideal for a consumer staples company, where demand is typically stable.

In Conagra’s Q4 2025, year on year sales volumes were flat. This result was a well-appreciated turnaround from its historical levels, showing the company is heading in the right direction.

Key Takeaways from Conagra’s Q4 Results

We liked how organic revenue and EPS both outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance was lowered and missed expectations, as management sees lower profit margins for the year. This outlook is weighing on shares, and the stock traded down 2% to $26.81 immediately following the results.