tapebrief

CAG · Q2 2026 Earnings

Cautious

Conagra Brands

Reported December 19, 2025

30-second summary

Q2 organic sales fell 3.0% on a 3.0-point volume drag and zero price/mix, missing management's own "low single-digit decline" guide on the worse side of the range, and the company posted a $664M GAAP net loss driven by a $30M reduction in FY26 adjusted equity earnings guide (Ardent Mills), ~$0.05 EPS impact, and other charges. Adjusted EPS of $0.45 and adjusted operating margin of 11.3% sit at the low end of the FY26 11.0–11.5% framework, yet management reaffirmed FY26 EPS at $1.70–$1.85 and organic growth at (1)% to +1% — meaning H2 organic now needs to print roughly +1.5% to +3.5% to bridge a -1.8% first-half average. The volume payoff from the "invest margin for volume" thesis is now two quarters absent.

Headline numbers

EPS

Q2 FY2026

$0.45

Revenue

Q2 FY2026

$2.98B

-6.8% YoY

Gross margin

Q2 FY2026

23.4%

Free cash flow

Q2 FY2026

$0.11B

Operating margin

Q2 FY2026

11.3%

Key financials

Q2 FY2026
MetricQ2 FY2026YoYQ1 FY2026QoQ
Revenue$2.98B-6.8%$2.63B+13.1%
EPS$0.45—$0.39+15.4%
Gross margin23.4%—24.3%-90bps
Operating margin11.3%—13.2%-190bps
Free cash flow$0.11B—$-0.03B+531.3%

Guidance

Company reaffirms FY2026 EPS ($1.70–$1.85) and organic growth (−1% to +1%) guidance despite Q2 missing qualitative 'low single-digit decline' expectation with actual −3.0% organic decline; withdraws interest expense and tax rate disclosure; introduces equity earnings target.

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

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
Organic net sales growthQ2 FY2026low single-digit decline expected-3.0%-3.0% vs. low single-digit decline (qualitative guidance; actual decline was more severe than 'low single-digit' typically implies)Missed

New guidance

MetricPeriodGuideYoY
Adjusted equity earningsFY2026approximately $170 million—

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Cost of goods sold inflation
FY2026
low 7% range (prior quarter); core inflation slightly higher than 4% (prior quarter)Withdrawn — no replacement—Withdrawn
Interest expense
FY2026
approximately $390 millionWithdrawn — no replacement—Withdrawn
Adjusted effective tax rate
FY2026
approximately 24%Withdrawn — no replacement—Withdrawn

Reaffirmed unchanged this quarter: Adjusted EPS ($1.70 to $1.85), Adjusted operating margin (~11.0% to ~11.5%), Organic net sales growth ((1)% to 1%)

Segment performance

Q2 FY2026
SegmentQ2 FY2026YoY
Grocery & Snacks$1.209B-1.5%
Refrigerated & Frozen$1.251B-5.1%
International$0.23B-2.9%
Foodservice$0.288B+0.2%

Platform metrics

Q2 FY2026
SegmentQ2 FY2026
Organic Net Sales Growth-3.0%
Volume Change (Organic)-3.0%
Price/Mix Change (Organic)0.0%

Profitability

Q2 FY2026
SegmentQ2 FY2026
Adjusted EBITDA$478M
Adjusted Operating Margin11.3%

Other KPIs

Q2 FY2026
SegmentQ2 FY2026
Net Debt$7.6B
Net Leverage Ratio3.83x
Dividend Per Share$0.35

Management tone

Q4 anchor: margin-for-volume doctrine → Q1 anchor: "consumer not out of the woods" → Q2 anchor: "active management and focused execution give us confidence in our path forward" + AI-led re-engineering as a new pillar.

The consumer caveat that anchored Q1 has been retired. Last quarter management said "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." This quarter the framing tightened to "our active management and focused execution give us confidence in our path forward" and "we are well positioned to return to organic net sales growth" in H2. The shift signals management wants to redirect investor attention from external demand conditions to internal execution levers — convenient when the external read just got worse (volume from -1.2% in Q1 to -3.0% in Q2), but it places more weight on H2 self-help than on a consumer recovery the data doesn't yet show.

Project Catalyst is the new strategic anchor and represents the biggest narrative addition since Q4's inflation reframing. Management introduced it as a re-engineering of core CPG processes using AI, led by senior leaders, with explicit acknowledgment that "There undoubtedly will be time to complete the project. There will be costs to complete the project. Then there will be a return on the project." — and deferred all quantification to "calendar 2026." This is a significant new disclosure but also the most evasive topic of the call: a multi-quarter initiative with material implications for the FY27 margin recovery thesis, introduced without a single number attached. Investors are being asked to underwrite optionality on a program whose costs and benefits won't be specified for at least one more quarter.

The pricing-vs-volume doctrine is now articulated more precisely than at any prior point. In response to Peter Galbo on competitor price cuts, management was explicit: "we did not take pricing inflation justified pricing to protect margins we kept pricing where it was" and "when you look at our percent volume sold on deal and you look at depth of discount, you do not see anything beyond what we've done historically. If anything, we're more conservative than what we've done historically." Three quarters ago this was framed as a defensive trade-off; one quarter ago it was hedged; this quarter it's positioned as a deliberate, sustainable competitive strategy. That conviction is admirable, but the supporting data point — Q2 organic volume at -3.0%, worse than Q1's -1.2% — argues the strategy is not yet generating the volume inflection it was designed to produce.

Supply chain self-help language hardened. Management cited "six straight quarters of consistent volume progress" prior to the original supply disruption and stated "this year is unfolding very consistent inflation with our expectations, which of course was based on last year's experience, in terms of both costs and lifts." This is a more confident posture than Q1's "absorption year" framing — but the volume numbers don't yet validate it, which is the central tension in the print.

Q&A highlights

Tom Palmer · JP Morgan

How does ConAgra offset the $30 million Ardent write-down (~$0.05 EPS impact) while maintaining full-year EPS guidance? What are the offsetting factors?

Management cited tariff timing favorability in Q1, favorable chicken inflation (offset by beef/pork headwinds), strong core productivity programs tracking well, and positive organic sales growth forecast for H2. They also noted a wider guidance range was intentionally provided due to volatile environment. They feel confident momentum allows them to cover the Ardent shortfall.

$30 million Ardent write-down (~$0.05 EPS impact)Core productivity programs running on trackTariff timing favorability noted (Q1 specific)Positive organic sales growth forecast for second half

Tom Palmer · JP Morgan

What are the details on Project Catalyst implementation, including cost savings targets, stepped-up CapEx spending, and timing?

Project Catalyst is a re-engineering of core CPG business processes using AI and technology to improve effectiveness and efficiency. Management acknowledged there will be time to complete, costs to incur, and returns to realize. Detailed unpacking of the program will occur during calendar 2026. Management expressed excitement about potential based on early months of work.

Project led by senior leadersFocus on automating historically manual CPG processesLeveraging AI and democratized technologyDetailed guidance coming in calendar 2026

David Palmer · Evercore

Two-year consumption trends show improvement but modest H2 growth and potential H1 FY27 decline. What can improve trends into FY27?

Management highlighted frozen and snacks as core growth engines. Snacks already growing robustly (near mid-single digits) with strong marketing plans. Frozen has strong momentum with nearly 53% market share in single-serve meals (near high watermark). Reclaimed nearly all market share lost to competitors. More high-quality promotional activity expected in H2 than prior year. Good baseline, advertising, and innovation support continued momentum into FY27.

Snacks growing near mid-single digitsFrozen single-serve meals at ~53% market share (near high watermark)Clawed back almost all market share lost during supply constraintsMore high-quality promotional activity in H2 vs. prior year

Peter Galbo · Bank of America

Given competitor price cuts announced, what pricing actions might ConAgra take in H2 FY26 and early FY27, particularly with Staples portfolio pricing already announced?

ConAgra has not rolled back prices to move volume. Instead, deferred inflation-justified pricing increases to layer on promotional activity while keeping list prices flat. This strategy has achieved desired inflection and growth without list price reductions. Volume sold on deal and depth of discount are conservative relative to historical patterns. Volume inflection is efficient.

No list price rollbacks to drive volumeDeferred inflation-justified pricing to enable promotionsPercent volume sold on deal is conservative vs. historyDepth of discount more conservative than historical

Answers to last quarter's watch list

Q2 organic sales decline magnitude. Organic sales declined 3.0% — at the unfavorable end of management's "low single-digit decline" expectation. The H2 inflection required to hit FY (1)% to +1% organic now needs H2 to print roughly +1.5% to +3.5%, which is a meaningful acceleration from the -1.8% first-half average. The math is tight but not yet broken. Status: Continue monitoring
Adjusted gross margin trajectory. Q2 adjusted gross margin was 23.4%, down ~100 bps from Q1's 24.4% and below the 24% threshold flagged last quarter. SG&A discipline held adjusted operating margin at 11.3%, inside the FY guide, but the gross margin trajectory is the wrong direction and reduces the buffer available for any further H2 inflation surprise. Status: Resolved negatively
Tax rate confirmation or further drift. The tax rate guide (~24% in Q1) was withdrawn entirely this quarter without replacement. The lack of disclosure prevents direct read-through, and combined with the interest expense withdrawal, two of the bridge items investors used to audit the EPS guide are now opaque. Status: Resolved negatively
Re-disclosure of withdrawn metrics. None of the previously withdrawn line items reappeared, and two additional FY26 line items (interest expense, tax rate) were withdrawn this quarter. The trend is toward less line-item accountability, not more. Status: Resolved negatively
Volume in Grocery & Snacks. Grocery & Snacks organic improved to -1.5% from Q1's -8.7% — a sharp sequential recovery and the most encouraging segment signal in the print. The merchandising-restoration thesis is working here. The offset is Refrigerated & Frozen worsening to -5.1% from -0.9%. Status: Resolved positively (for the specific segment flagged)

What to watch into next quarter

H2 organic sales acceleration. With H1 averaging -1.8%, hitting the (1)% to +1% FY guide requires H2 organic of roughly +1.5% to +3.5% — an acceleration of ~3.3 to ~5.3 points sequentially. Q3 needs to show clear positive organic to keep the FY guide live; another negative print effectively breaks the framework.

Refrigerated & Frozen reversal. R&F worsened from -0.9% in Q1 to -5.1% in Q2 despite management citing ~53% single-serve frozen share. If Q3 shows further deterioration, the "frozen as core growth engine" narrative that anchors the FY27 thesis breaks, and Project Catalyst becomes the only remaining FY27 lever.

Project Catalyst quantification. Management committed to "calendar 2026" specifics. Watch Q3 for the first quantified cost-and-savings framework — the absence of any numbers leaves a material hole in the FY27 margin recovery bridge.

Gross margin stabilization at or above 23.4%. Another ~100 bps quarterly compression would put adjusted gross margin near 22.4% and put the 11.0–11.5% operating margin floor at risk even with continued SG&A discipline.

Net leverage trajectory. Leverage moved from 3.55x in Q1 to 3.83x in Q2, already at the (withdrawn) FY26 exit target of ~3.85x with two quarters of capex and dividends still to run. Watch whether Q3 leverage pushes above 3.85x — that would force the BBB rating conversation back into focus.

Sources

  1. Conagra Brands Q2 FY2026 press release (SEC EX-99.1), filed December 19, 2025 — https://www.sec.gov/Archives/edgar/data/23217/000002321725000094/tmb-20251219xex99d1.htm
  2. Conagra Brands Q2 FY2026 earnings call Q&A (analyst exchanges with JP Morgan, Evercore, Bank of America)
  3. Prior Tapebrief coverage: CAG Q1 FY2026 (October 1, 2025) and Q4 FY2025 (July 10, 2025)

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