CAG · Q2 2026 Earnings

Cautious

Conagra Brands

Reported December 19, 2025

30-second summary

Q2 FY2026 organic net sales fell 3.0% on volume -3.0% and flat price/mix — at the bottom edge of management's "low single-digit decline" guide, and the YTD organic decline of -1.9% (implying Q1 closer to -0.8%) shows sequential deterioration into Q2, making the FY (1)% to +1% organic guide a stretch that now requires a sharp H2 inflection. GAAP EPS swung to -$1.39 on ~$968M of non-cash goodwill and brand impairment charges (~$1.88/sh, largely Refrigerated & Frozen) driven by a sustained decline in share price and market cap; non-GAAP EPS held at $0.45 and the FY26 $1.70–$1.85 adjusted EPS guide was reaffirmed — credibility hinging on ~5% core productivity, Q1 tariff timing favorability, and a chicken-inflation offset to beef/pork headwinds. Separately, Ardent Mills equity earnings were lowered to ~$170M (from ~$200M) on lower commodity trading revenue at the JV — a ~$30M / ~$0.05 EPS headwind that management is absorbing within the reaffirmed EPS range. Management also withdrew interest expense and tax-rate guidance for the second consecutive quarter, continuing the pattern of selective disclosure that began at Q1.

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

Metric	Q2 FY2026	YoY	Q1 FY2026	QoQ
Revenue	$2.98B	-6.8%	$2.63B	+13.1%
EPS	$0.45	—	$0.39	+15.4%
Gross margin	23.4%	—	24.3%	-90bps
Operating margin	11.3%	—	13.2%	-190bps
Free cash flow	$0.11B	—	$-0.03B	+531.3%

Guidance

Company reaffirmed FY2026 EPS and operating margin guidance despite Q2 organic sales decline of -3.0%, narrowed COGS inflation view, and withdrew prior tax/interest expense guidance.

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	Q2 FY2026	low single-digit decline expected	-3.0%	-3.0% vs low single-digit decline (within range but at lower end)	Missed

New guidance

Metric	Period	Guide	YoY
Adjusted Equity Earnings	FY2026	approximately $170 million	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Cost of Goods Sold Inflation	FY2026	low 7% range	approximately 7%	Narrowed from 'low 7% range' to point estimate 'approximately 7%'	Lowered
Interest Expense	FY2026	approximately $390 million	Withdrawn — no replacement	—	Withdrawn
Adjusted Effective Tax Rate	FY2026	approximately 24%	Withdrawn — no replacement	—	Withdrawn

Reaffirmed unchanged this quarter: Adjusted Operating Margin (~11.0% to ~11.5%), Adjusted EPS ($1.70 to $1.85)

Segment performance

Q2 FY2026

Segment	Q2 FY2026	YoY
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

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

Profitability

Q2 FY2026

Segment	Q2 FY2026
Adjusted Gross Margin	23.4%
Adjusted Operating Margin	11.3%
Free Cash Flow	$113 million
Net Leverage Ratio	3.83x
Adjusted EBITDA	$478 million

Management tone

Q4 anchor: margin-for-volume doctrine declared → Q1 anchor: cautious "feeling good about setup" amid consumer weakness → Q2 anchor: confidence-building pivot to "well positioned to return to organic net sales growth" despite sequential volume deterioration.

Three quarters ago Conagra told investors the FY26 EPS step-down was the price of a deliberate margin-for-volume trade that would pay back in restored shelf velocity. One quarter ago, with volume still negative, management framed the consumer as "not out of the woods yet" and tightened inflation and tax assumptions higher. This quarter, with volume worse and gross margin down 292 bps YoY, the framing has flipped to forward optimism: management is "well positioned to return to organic net sales growth" with "focused execution" giving "confidence in our path forward." The shift signals a deliberate narrative reset away from explaining current weakness toward selling the H2 inflection — which is now where 100% of the FY guide's credibility lives.

The Q&A handling of the Ardent Mills equity earnings cut (~$30M, ~$0.05 EPS impact, driven by lower commodity trading revenue at the JV) tells you how the EPS bridge actually works. Three quarters ago FY26 EPS was guided down 23% as a clean strategic decision; this quarter, the same EPS range is being defended dollar-by-dollar with specific Q1 tariff timing favorability, chicken-vs-beef/pork offsets, and 5% productivity. The anchor from Tom Palmer's exchange: management cited "good operating profit and margin performance in H1" and a "wider EPS range maintained due to volatile environment" — meaning the $0.15 EPS spread is now the buffer absorbing real shortfalls, not strategic optionality.

The supply chain narrative continued its multi-quarter evolution. Q4 framed it as multi-year strategic investment; Q1 reframed it offensively around 98% service recovery enabling share recapture; this quarter management converted that into a quantified claim — frozen single-serve meals back to ~53% share, "clawed back almost all market share lost to competitor during supply constraints," vegetable business "back to record share." The David Palmer anchor: investors should expect "strong advertising, innovation, and program pipeline for H2 momentum into FY27." If R&F revenue stays at -5.1%, the share-data narrative and the revenue trajectory will diverge to a point where one of them has to be wrong.

The withdrawal pattern hardened. Q1 pulled six FY26 line items (capex, FCF conversion, leverage, equity earnings, pension income, 53rd-week accretion); Q2 pulled two more (interest expense, tax rate) — both metrics that were freshly revised one quarter ago. Equity earnings re-entered as a lowered ~$170M guide (vs. the prior ~$200M estimate). The cumulative effect is that the FY26 disclosure framework management built at Q4 has been substantially dismantled six months later, and the EPS line is being defended without the granular underwriting that justified it originally.

A new long-term margin recovery framework debuted in Q&A via the BNP exchange: ~5% productivity, eventual inflation return toward 2%, supply chain capex returns from chicken plants and repatriation, selective pricing, and "Project Catalyst" — a process re-engineering program leveraging tech/AI with details promised for Calendar 26. The pivot to multi-year margin storytelling (rather than defending FY26 specifically) suggests management knows the FY26 framework is fragile and is building the FY27+ bridge investors will need to underwrite.

Q&A highlights

Tom Palmer · JP Morgan

Clarification on annual outlook: reiterated sales and operating margin guidance but took down Arden by ~$30M (~$0.05 EPS impact). What offsets this shortfall in the P&L to maintain EPS guidance range?

Management cited good operating profit and margin performance in H1, with favorability from tariff timing (Q1), chicken inflation offsets (beef/pork headwinds), and core productivity programs on track. Broader guidance range set due to volatile environment. Confident in covering Arden shortfall while maintaining EPS guidance.

Arden write-down: ~$30M (~$0.05 EPS impact)Core productivity programs running on trackTariff favorability in Q1Chicken inflation favorability with beef/pork offsets

David Palmer · Evercore

Two-year consumption trends imply H2 FY26 return to growth but modest FY27 decline. How can multi-year trends improve, and what actions will support organic sales growth and earnings growth expected in FY27?

Management identified frozen and snacks as two growth domains. Snacks already growing robustly (benefiting from bounce-back post-gas price decline). Frozen reclaimed market share (frozen single-serve meals ~53% share), with Q2 comparisons distorted by blockbuster prior year. Strong pipeline of high-quality promotions and marketing support for H2 momentum into FY27.

Snacks growing at near mid-single digitsFrozen single-serve meals market share: ~53% (near high watermark)Clawed back almost all market share lost to competitor during supply constraintsVegetable business back to record share

Peter Galbo · Bank of America

Competitors have announced/enacted price cuts. What is ConAgra's perspective on peer pricing actions in H2 FY26 and early FY27, and how will ConAgra respond given its own pricing announcements in Staples?

ConAgra has minimal overlap with major competitors. In frozen and snacks, ConAgra is market leader and faces limited direct competition. Strategy differs from price-cutting: deferred inflation-justified pricing rather than rolling back prices; using high-quality, historically-consistent promotional activity to drive volume. Volume sold on deal and discount depth remain conservative vs. historical levels.

Limited overlap with large competitors in frozen/snacksMarket leader position in frozenMinimal interaction in meat snacks and seeds categoriesDid not roll back list prices; deferred inflation-justified pricing

Max Gumport · BNP

Q3 operating margins expected below Q2 due to AMP (>3% of sales) and absorption headwinds. Can you quantify the absorption headwind impact?

Q3 gross margin expected similar to Q2 (maybe slightly better) despite absorption timing variability. Main Q3 operating margin drivers vs. Q2: AMP >3% and SG&A as % of sales higher than Q2. Did not specify precise absorption impact, citing difficulty in isolating it from other puts/takes.

Q3 AMP: >3% of net salesQ3 gross margin: similar to Q2, maybe slightly betterQ3 SG&A as % of net sales: higher than Q2Absorption timing creates volatility; management avoids quarter-specific detail

Max Gumport · BNP

Gross margin fell from pre-COVID high 20%s to ~24% expected for FY26. What prevents return to high 20% gross margins over next several years?

Management expects margin expansion, especially in frozen, with stated building blocks: (1) productivity at ~5% (strong); (2) eventual inflation relief back to ~2%; (3) supply chain resiliency (chicken plants, repatriating outsourced production); (4) pricing in select categories; (5) Project Catalyst (process re-engineering with tech/AI). Plans to claw margins north following FY26, alongside portfolio reshaping for growth and margins.

Current productivity: ~5%Target inflation relief: eventual return to ~2% from current 7% gross inflationSupply chain investments: chicken plants, repatriation of outsourced productionPricing actions in select categories underway

Answers to last quarter's watch list

Q2 FY2026 organic sales decline magnitude. Q2 organic sales declined 3.0% on volume -3.0% and flat price/mix — at the boundary of "low single-digit decline" and sequentially worse than the YTD-implied Q1 figure of ~-0.8%. To hit the FY (1)% to +1% organic guide, H2 now needs to run at roughly +1% to +3% organic, a 400–600 bps swing from current run-rate that no in-period data supports. Status: Resolved negatively

Adjusted gross margin trajectory. Q2 adjusted gross margin compressed 292 bps YoY to 23.4% — sustained sub-24% as flagged in the prior watch. Management indicated Q3 should be "similar to Q2, maybe slightly better." The 11.0–11.5% FY operating margin guide now requires Q4 to do disproportionate heavy lifting. Status: Resolved negatively

Tax rate confirmation or further drift. Tax rate guidance was withdrawn entirely this quarter without replacement — the inverse of confirmation. Investors can no longer track whether the ~24% Q1 assumption holds, removing visibility into one of the EPS bridge inputs. Status: Resolved negatively

Re-disclosure of withdrawn metrics. None of the six Q1-withdrawn FY26 metrics (capex, FCF conversion, leverage, equity earnings, pension income, 53rd-week accretion) were restored in clean form. Equity earnings was reintroduced as a lowered ~$170M FY26 guide (down from the prior ~$200M estimate). Two additional metrics (interest expense, tax rate) were freshly withdrawn this quarter. Status: Resolved negatively

Organic net sales in Grocery & Snacks. Grocery & Snacks organic net sales improved meaningfully to -1.5% in Q2, with the YTD bridge (-1.3% H1) implying a roughly flat Q1 — a clear sequential recovery and the most favorable segment delta this quarter. However, Refrigerated & Frozen swung in the opposite direction (YTD R&F at -2.7% with Q2 at -5.1% implies a roughly flat Q1), so the "merchandising restoration" thesis is working in Grocery & Snacks but is not yet evident in R&F where the chicken capex is concentrated. Status: Resolved positively

What to watch into next quarter

Q3 FY2026 organic sales trajectory. The FY (1)% to +1% organic guide now requires roughly +1% to +3% in H2. If Q3 prints worse than -1% organic, the FY organic guide breaks mathematically and the EPS guide goes from defensible to optimistic.

R&F segment recovery. The -5.1% Q2 print is the largest hole in the portfolio. Management's "blockbuster prior year" explanation is testable — if Q3 R&F doesn't recover to better than -2%, the ~53% market share claim and the revenue line are telling different stories.

Adjusted gross margin floor. Q2 was 23.4% (-292 bps YoY), Q3 guided "similar, maybe slightly better." If Q3 prints below 23.4%, Q4 needs gross margin near 25%+ to make the FY operating margin range work — a step-up the cost structure does not currently support.

Project Catalyst quantification. Management promised detail in Calendar 26 (i.e., the Q3 print in late March). Whether Catalyst comes with quantified productivity targets and a defined timeline will determine if it's a real margin lever or narrative cover for the FY27 setup.

Cumulative disclosure withdrawals. Eight FY26 line items have now been pulled across Q1–Q2 without replacement. If Q3 brings further withdrawals (or further "new disclosures" replacing prior framework metrics on different terms), the FY26 framework management built at Q4 is effectively gone, and analyst forward models lose their anchor points.

Sources

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
Conagra Brands Q2 FY2026 earnings call Q&A transcript
Tapebrief prior coverage: Q1 FY2026 (October 1, 2025); Q4 FY2025 (July 10, 2025)

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