Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

CAG · Q1 2026 Earnings

Conagra Brands

Reported October 1, 2025

30-second summary

Q1 organic sales fell 0.6% on volume -1.2% and price/mix +0.6%, with adjusted operating margin at 11.8% — squarely inside the FY26 11.0–11.5% guide but well below year-ago levels. Management reaffirmed FY26 EPS of $1.70–$1.85 but tightened core and total COGS inflation higher, lifted the tax rate 100 bps to ~24%, and guided Q2 organic sales to another low-single-digit decline, pushing the promised return to positive organic growth into the fiscal second half. The "invest margin for volume" thesis is not yet visible in the volume line.

Headline numbers

EPS

Q1 FY2026

$0.39

Revenue

Q1 FY2026

$2.63B

-5.8% YoY

Gross margin

Q1 FY2026

24.3%

Free cash flow

Q1 FY2026

$-0.03B

Operating margin

Q1 FY2026

13.2%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$2.63B	-5.8%	$2.78B	-5.3%
EPS	$0.39	—	$0.56	-30.4%
Gross margin	24.3%	—	25.4%	-110bps
Operating margin	13.2%	—	11.5%	+170bps
Free cash flow	$-0.03B	—	—	—

Guidance

Company reaffirmed full-year EPS guidance of $1.70-$1.85 but lifted tax rate 100 bps and signaled softening to low single-digit Q2 organic decline; core and total COGS inflation revised marginally higher, partially offset by $10M interest expense reduction.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Organic net sales growth	Q1 FY2026	Not explicitly guided at Q-level	-0.6%	in-line with implied range from FY guide	Met

New guidance

Metric	Period	Guide	YoY
Organic net sales growth	Q2 FY2026	low single-digit decline expected	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Interest expense	FY2026	approximately $400 million	approximately $390 million	$10 million reduction	Lowered
Adjusted effective tax rate	FY2026	approximately 23%	approximately 24%	1 percentage point increase	Raised
Core cost of goods sold inflation	FY2026	approximately 4%	slightly higher than 4%	modestly higher	Raised
Total cost of goods sold inflation	FY2026	approximately 7%	low 7% range	narrowed and raised to floor of low-7s range	Raised
Equity earnings contribution	FY2026	approximately $200 million	Withdrawn — no replacement	—	Withdrawn
Pension income	FY2026	approximately $25 million	Withdrawn — no replacement	—	Withdrawn
Capital expenditures	FY2026	approximately $450 million	Withdrawn — no replacement	—	Withdrawn
Free cash flow conversion	FY2026	~90%	Withdrawn — no replacement	—	Withdrawn
Net leverage ratio	FY2026	approximately 3.85x	—	—	Lowered
53rd week EPS impact	FY2026	$0.05	Withdrawn — no replacement	—	Withdrawn

Segment performance

Q1 FY2026

Segment	Q1 FY2026	YoY
Grocery & Snacks	$1.08B	-8.7%
Refrigerated & Frozen	$1.076B	-0.9%
International	$0.212B	-18.0%
Foodservice	$0.265B	-0.8%

Platform metrics

Q1 FY2026

Segment	Q1 FY2026
Organic Net Sales Growth	-0.6%
Volume Change (Organic)	-1.2%
Price/Mix (Organic)	+0.6%

Profitability

Q1 FY2026

Segment	Q1 FY2026
Adjusted Operating Margin	11.8%
Adjusted Gross Margin	24.4%
Adjusted EBITDA	$441.0 million

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Net Leverage Ratio	3.55x
Dividend Per Share	$0.35

Management tone

Q4 anchor: pricing-vs-volume doctrine inverted → Q1 anchor: cautious "feeling good about setup" amid persistent consumer weakness.

Last quarter management framed FY26 as a deliberate margin-for-volume trade — investors were told to underwrite a 23% EPS step-down because brand health required walking away from broad-based pricing. One quarter in, the volume payoff is absent (-1.2% organic volume in Q1) and management is hedging on the timing of any inflection: "the volume that we had in Q1 should be similar in Q2." The shift signals that elasticity recovery from prior pricing actions is taking longer than the Q4 narrative implied, and the "positive organic growth in fiscal second half" promise now bears all the weight of the FY guide.

In Q4 inflation was reframed from transitory to structural ("sixth consecutive year above historical norms"), but the FY26 build assumed ~7% total COGS inflation and ~4% core. This quarter both moved higher — core now "slightly higher than 4%" and total "low 7% range" — with the anchor: "The consumer is certainly not out of the woods yet. We're still seeing value-seeking behavior. We're still having to deal with inflation and tariffs." The shift signals that the Q4 inflation assumptions, which already drove the EPS guide-down, were not conservative enough.

Supply chain narrative shifted again: Q4 framed the chicken-plant capex as an absorption headwind through FY26 with payoff in FY27; this quarter management leaned into 98% service recovery as a strategic competitive advantage. The anchor: "having inventory in place so we don't fall out of stock again and fail to keep up with consumer demand, particularly going into holiday season is absolutely the right thing to do." The shift is from defensive (fix the disruption) to offensive (use restored service to take merchandising share back), but the volume data doesn't yet validate it.

Q4 explicitly guided to net leverage UP at 3.85x by FY26 exit. This quarter the leverage guide was withdrawn entirely — yet the Q1 actual prints at 3.55x, an improvement. Pulling guidance on a metric that's tracking favorably, alongside withdrawing capex, FCF conversion, and pension income guides, suggests management wants flexibility to manage portfolio actions without being held to a framework. That's a notable retreat from Q4's unusually detailed FY26 disclosure package.

The margin-recovery-in-FY27 thesis is being reinforced rather than weakened: "we do expect good margin expansion following fiscal 26… That'll be a combination of good looking top line and an improving gross margin line as well." Q4 introduced this; Q1 doubles down. Investors are being asked to extend the recovery horizon while accepting that the FY26 bridge is bumpier than originally specified.

Recurring themes management leaned on this quarter:

Supply chain recovery enabling return to merchandising and volume growthInnovation pipeline performing ahead of prior year despite disruptionFrozen and snacks as core growth engines with 70% of retail businessHorses for courses operating model: volume investment in growth categories vs. margin capture via pricing in inflation-exposed categoriesValue-seeking consumer behavior requiring value-focused innovation and portfolio positioningMargin clawback opportunities in fiscal 2027 from pricing realization, inflation relief, and supply chain investments

Risks management surfaced:

Consumer value-seeking behavior concentrated in lower-income cohorts limiting pricing powerAnimal protein inflation (beef, pork, turkey, eggs) exceeding original forecast with limited hedging beyond Q2Tariff costs persisting with no assumption of removal in guidanceMerchandising share loss to competitors during supply disruption recovery periodExecution risk on frozen modernization projects (baked and fried chicken facilities) with margin drag during outsourcing period

Answers to last quarter's watch list

Does organic volume turn positive? No. Q1 organic volume was -1.2%, an improvement from Q4's -2.5% but still negative, and management explicitly guided Q2 volume to be "similar" to Q1. The FY26 organic guide of (1)% to +1% now requires meaningful H2 acceleration that is not yet evident in run-rate data. Status: Continue monitoring

Refrigerated & Frozen segment trajectory. R&F revenue was -0.9% YoY, a sharp sequential improvement from -4.4% in Q4. This was the only domestic segment to materially improve and supports management's frozen-recovery thesis. Status: Resolved positively

Net leverage trajectory toward the 3.85x FY26 exit target. Q1 leverage printed at 3.55x, below the prior 3.6x FY25 exit and well inside the (now-withdrawn) 3.85x FY26 exit target. The favorable trajectory is offset by management pulling the explicit guide. Status: Resolved positively

Tariff mitigation progress. Management did not quantify mitigation progress this quarter, but total COGS inflation was raised to "low 7% range" from "approximately 7%" — implying mitigation is not running ahead of plan and may be modestly behind. Status: Resolved negatively

Any sign of pricing actions on "cash businesses." Organic price/mix turned positive at +0.6% from Q4's -1.0%, indicating selective pricing has resumed somewhere in the portfolio. Management framed this as "horses for courses" — volume investment in growth categories, pricing in inflation-exposed ones — consistent with the Q4 doctrine rather than a break from it. Status: Continue monitoring

What to watch into next quarter

Q2 organic sales decline magnitude. Management guided to "low single-digit decline." If Q2 prints worse than -3%, the H2 inflection required to hit FY (1)% to +1% organic becomes mathematically very difficult and the EPS guide is at risk.

Adjusted gross margin trajectory. Q1 was 24.4%, down from Q4's 25.8%. Watch whether Q2 stabilizes or compresses further — sustained sub-24% gross margin would put the 11.0–11.5% FY operating margin guide under pressure even with SG&A leverage.

Tax rate confirmation or further drift. The 100 bps raise to ~24% absorbed roughly $0.02 of EPS headroom. Any further drift toward 25% would force a hard look at whether the $1.70–$1.85 EPS range still holds.

Re-disclosure of withdrawn metrics. Six FY26 line items were pulled without replacement. Watch whether capex, FCF conversion, or leverage reappear in Q2 disclosure — sustained omission suggests either material portfolio activity in progress or unwillingness to be held to the Q4 framework.

Volume in Grocery & Snacks. This segment swung from -3.3% in Q4 to -8.7% in Q1 — the largest deterioration in the portfolio. If it doesn't stabilize in Q2, the "merchandising restoration" thesis post-service recovery isn't working where it matters most.

Sources

Conagra Brands Q1 FY2026 press release (SEC EX-99.1), filed October 1, 2025 — https://www.sec.gov/Archives/edgar/data/23217/000002321725000083/tmb-20251001xex99d1.htm
Conagra Brands Q4 FY2025 press release and prior Tapebrief coverage (July 10, 2025)

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