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Conagra (CAG) is trading modestly lower after reporting its Q2 (Nov) results. The company delivered a slight EPS beat, while revenue declined 6.8% to $2.98 bln, which was in line with expectations. CAG also reaffirmed its FY26 guidance, expecting EPS of $1.70-1.85 and organic sales of -1% to +1%.

• The sales decline reflected a 3.9% headwind from M&A, a 3.0% decline in organic sales, and a 0.1% benefit from FX. Organic sales were driven by flat price/mix and a 3.0% decline in volume, with both organic sales and volume softer than the prior quarter.
• Results continue to be pressured by a challenging macro, as value-seeking behavior persisted, weighing most on low and middle-income consumers. The quarter also saw some unanticipated dynamics, including the pause in SNAP payments and unfavorable weather.
• Management also noted a holiday inventory timing shift. Retailers slowed orders late in the quarter amid the shutdown/SNAP disruption, and several large customers pushed promotional inventory builds, especially in frozen, into Q3.
• Grocery & Snacks organic sales declined 1.5% (price/mix +0.8%, volume -2.3%); Refrigerated & Frozen organic sales fell 5.1% (price/mix -2.1%, volume -3.0%); International organic sales decreased 2.9% (price/mix +3.5%, volume -6.4%); Foodservice organic sales increased 0.2% (price/mix +4.2%, volume -4.0%).
• Importantly, it saw momentum in snacks and frozen foods, two areas it has been investing in. Management said most of its frozen portfolio held or gained share, while snacks continued to benefit from its more protein-focused mix, with meat snacks up 5% in volume and seeds up 4%.
• Management is still expecting things to improve in the second half, noting service levels around 99% (its best sustained level) and improved supply consistency, alongside stepped-up merchandising/A&P.

Briefing.com Analyst Insight

Conagra is still facing meaningful headwinds that keep the near-term setup challenging, even as management expects improvement in the coming quarters. Q2 had extra "noise," with the government shutdown (and related SNAP timing) and unfavorable weather layering on top of an already value-conscious consumer backdrop. Volumes were a bit softer than Q1, but management framed part of that as timing, retailers slowed ordering late in the quarter and some promotional inventory builds, particularly in frozen, shifted into Q3. On the positive side, the company is seeing better momentum in key focus categories like snacks and frozen, and service levels suggest supply constraints are largely in the rearview mirror. Still, profitability remains under pressure as inflation and higher investment spend collide with a softer top line. Ultimately, CAG needs to deliver on the second-half inflection to pull the stock out of its slump.