# Conagra Brands (CAG)

Sector: Packaged foods

| Field | Value |
|---|---|
| Price | $14.47 |
| Fair value (Analysts) | $23.00 |
| Discount to fair value | 37.1% |
| Fair value uncertainty (Analysts) | Medium |
| Economic moat (Analysts) | None |
| LSEG analyst rating (1 strong buy to 5 strong sell) | 3.28 |
| Data as of | 2026-10-16 |
| Next earnings | 2026-12-30 (estimate) |

## In short

The market prices Conagra for falling volumes and high debt, and stable volumes with lower leverage under the new CEO over the next two years can close the gap.

## Themes and gap

- Themes: Weak consumer (weak-consumer), High debt (leverage), New management (management-change)
- Gap type: Slow (slow)
- Why: The new CEO's plan to restore volumes and margins and to lower debt needs several years, and demand for packaged food changes slowly.

## About

Conagra Brands makes and sells branded packaged foods in North America. Its brands include Birds Eye, Duncan Hines, Healthy Choice, Marie Callender's, Reddi-wip, Slim Jim and Angie's BOOMCHICKAPOP. It has four segments: Grocery & Snacks, Refrigerated & Frozen, International and Foodservice. Net sales were $11.3 billion in fiscal 2026, which ended on May 31, 2026. Conagra also owns part of Ardent Mills, a flour milling joint venture, and reports its share of the profit as equity earnings. In the first quarter of fiscal 2026, it sold its Chef Boyardee business and some frozen seafood brands and used the money to repay debt. John Brase became President and CEO on June 1, 2026.

## Thesis

The market prices Conagra for falling volumes and high debt. Organic net sales fell 1.1% in Q1 fiscal 2027, with volume down 2.1%, and the company expects organic net sales to fall 1% to 3% in fiscal 2027. Cost inflation lowered the adjusted gross margin to 23.8%. Net leverage was 3.99 times at August 30, 2026, and in July 2026 the new CEO cut the annual dividend to $0.70 per share from $1.40. In Q4 fiscal 2026, Conagra recorded $2.0 billion of non-cash goodwill and brand impairments because of the fall in its share price and market value. For the gap to close, three things must be true. Volumes must stop falling as the company spends more on advertising and on its brands. The adjusted operating margin must stay within the fiscal 2027 guidance of 10.0% to 10.5%, and then grow. Net leverage must start to fall from about 4.0 times as free cash flow conversion stays above 90%. The Q2 fiscal 2027 report, estimated for about December 30, 2026, shows the holiday quarter. The fiscal 2027 results and the fiscal 2028 outlook in July 2027 are the larger test of the new plan. If these checks pass, the gap can close over the next four to six quarters. The main reason it may not close is a longer decline in demand for its grocery and frozen brands, which more advertising may not stop.

## Checkpoints

- Dec 30, 2026 (estimate): Q2 fiscal 2027 earnings: volumes and margin. Status: Pending. Watch: Organic net sales within the full year range of minus 3% to minus 1% and an adjusted operating margin near the 10.0% to 10.5% guidance pass; a guidance cut or a larger volume decline fail.
- Jul 2027 (estimate): Fiscal 2027 results and fiscal 2028 outlook. Status: Pending. Watch: Net leverage at or below about 4.0 times and an outlook for stable or growing organic net sales pass; higher leverage or another dividend cut fail.

## Balance sheet

- Cash: $372M
- Debt: $7.8B
- Net debt: $7.4B
- Net debt / EBITDA: 4.0× (medium)
- Interest cover: 2.9×
- Undrawn credit line: $2.0B, to June 2030
- Debt due within 12 months: $820M

Conagra funds itself with senior notes and commercial paper, backed by a $2.0 billion revolving credit facility that matures on June 27, 2030. At August 30, 2026, total debt was $7.76 billion: $6.94 billion of senior long-term debt, $787.5 million of current installments and $32.5 million of notes payable. Nothing was borrowed under the revolving credit facility or the commercial paper program. In July 2026, Conagra issued $500 million of 5.40% notes due 2031. Net debt was $7.4 billion, and net leverage, as the company reports it, was 3.99 times. The facility requires EBITDA to interest of at least 3.0 times and funded net debt to EBITDA of no more than 4.5 times, and Conagra was in compliance. Interest cover is operating profit divided by net interest expense for Q1 fiscal 2027. The company expects interest expense of about $360 million and net leverage of about 4.0 times at the end of fiscal 2027. The dividend cut to $0.70 per share a year lowers cash payments by about half.

As of 2026-08-30.

Sources:

- https://www.sec.gov/Archives/edgar/data/23217/000110465926112354/tmb-20260830x10q.htm
- https://www.sec.gov/Archives/edgar/data/23217/000002321726000052/tmb-ex99d1.htm
- https://www.sec.gov/Archives/edgar/data/23217/000002321726000022/tmb-20260715xex99d1.htm

## Recent events

- 2026-09-30: Conagra reported Q1 fiscal 2027 results. Net sales fell 1.4% to $2.6 billion, and organic net sales fell 1.1%, with volume down 2.1% and price and mix up 1.0%. Adjusted EPS rose 5.1% to $0.41, helped by higher earnings from Ardent Mills. Free cash flow was negative $128 million because of lower operating profit and litigation payments. Conagra reaffirmed its fiscal 2027 guidance of adjusted EPS of $1.40 to $1.50.
- 2026-07-28: Conagra completed an offering of $500 million of 5.400% senior notes due August 1, 2031. On the same day, it said that Thomas McGough, Chief Operating Officer, will retire no later than September 4, 2026, and that it will eliminate the position.
- 2026-07-15: Conagra reported Q4 and full year fiscal 2026 results. Full year adjusted EPS was $1.72, and organic net sales fell 0.4%. In Q4, it recorded $2.0 billion of non-cash goodwill and brand impairment charges, which caused a loss of $3.37 per share. Guidance for fiscal 2027 is an organic net sales change of minus 3% to minus 1% and adjusted EPS of $1.40 to $1.50. The board cut the dividend to an annual rate of $0.70 per share.
- 2026-04-13: Conagra named John Brase as President and CEO, effective June 1, 2026. Mr. Brase was President and Chief Operating Officer of The J.M. Smucker Company until February 2026 and worked for about 30 years at Procter & Gamble before that.

## Risks

- High: Volumes fell 2.1% in Q1 fiscal 2027, and Grocery & Snacks volume fell 5.4%. The company expects organic net sales to fall again in fiscal 2027. If more advertising and brand spending do not stop the decline, profit and cash flow fall further.
- High: Net leverage was 3.99 times at August 30, 2026. The revolving credit facility requires funded net debt to EBITDA of no more than 4.5 times. A further fall in EBITDA leaves less room under this limit and can force more cuts to spending or the dividend.
- Medium: Cost of goods sold inflation lowered the adjusted gross margin by 62 basis points to 23.8% in Q1 fiscal 2027. Higher costs for ingredients, packaging, labor or tariffs can lower margins if Conagra cannot raise prices.
- Medium: Conagra faces product liability claims about Pam and other cooking sprays. It paid $141.1 million in fiscal 2026 and $44.3 million in Q1 fiscal 2027, and a jury entered a $25 million verdict against it in Q3 fiscal 2026. It also faces lawsuits about ultra-processed foods.

## Links

- Page: https://picks.kamadorueda.com/company/CAG/
- History of changes: https://picks.kamadorueda.com/company/CAG/history/
- JSON with full history: https://picks.kamadorueda.com/data/company/CAG.json

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