Conagra Brands (NYSE:CAG) reported a return to organic net sales growth in its fiscal third quarter of 2026, driven by improved momentum in frozen and continued outperformance in snacks, while maintaining a focus on free cash flow and debt reduction.
Organic sales growth returns, with sequential improvement across segments
CEO Sean Connolly said the company “returned to organic net sales growth in line with our expectations that we shared last quarter,” and pointed to “continued upward inflection in our growth businesses” as frozen gained market share and snacks again grew faster than their categories. He added that in staples, Conagra continues to “take a different approach, managing the business for cash.”
CFO Dave Marberger reported organic net sales increased 2.4% in the quarter to approximately $2.8 billion. The company’s net sales bridge showed volume up 0.5% and price/mix up 1.9%, with foreign exchange providing a 50-basis-point tailwind. Marberger noted divestitures—Chef Boyardee and the frozen seafood businesses—represented a 480-basis-point impact on reported results.
Marberger also said quarterly shipments “modestly exceeded consumption,” primarily in refrigerated and frozen, citing retailer inventory changes around merchandising events, the lapping of last year’s unfavorable trade adjustment, and the impact of prior-year supply constraints—“all dynamics we anticipated.”
Frozen share recovery and snacks strength highlighted
Connolly emphasized progress in frozen, calling it a strategic priority that is “delivering top-line growth and strong share performance.” He said frozen retail volume grew strongly in the third quarter on both one- and two-year bases, with “88% of the portfolio holding or gaining volume share” over those periods. He added that in key frozen categories, the company has “restored market share following temporary supply constraints that emerged last year,” with single-serve meals and vegetables gaining share versus both last year and two years ago.
In snacks, Connolly said the portfolio delivered its fifth consecutive quarter of dollar sales growth that outpaced category growth, describing snacks as “a clear growth engine for the company.” He pointed to strength in protein-forward offerings, stating meat snacks rose “approximately 9% in dollars and 10% on a volume basis,” while seeds also posted “healthy dollar and volume growth.”
Connolly also discussed inflation-related pricing actions in parts of the sweet treats portfolio, including Swiss Miss and Snack Pack, tied to higher cocoa costs. He said elasticities have been “better than historical norms,” with “impressive” dollar growth and “minimal impacts on volume.”
On staples, Connolly said Conagra implemented inflation-justified pricing across much of its canned portfolio in late Q2, with elasticities “in line with expectations,” and noted “positive trends in dollar sales” that can help fund investments in higher-growth areas.
Margins decline year over year as inflation remains elevated
Marberger said adjusted gross margin was 23.7% and adjusted operating margin was 10.6%, both down versus the prior year but “in line with our expectations.” Adjusted earnings per share were $0.39, down $0.12 from the year-ago period.
Adjusted operating margin declined 213 basis points year over year. Marberger said price/mix provided a 130-basis-point tailwind as inflation-justified pricing more than offset incremental merchandising investments. However, he said total inflation remained elevated and in line with expectations at roughly 7%, including both core inflation and “gross tariff expense.”
He said Conagra delivered strong productivity in the quarter, with core productivity including tariff mitigation at “over 5% of cost of goods sold.” Partially offsetting that, he cited unfavorable operating leverage from lower internal production volumes, driven “largely to price elasticity impacts,” planned actions to reduce inventory levels, and other supply chain investments.
Adjusted SG&A, including advertising and promotion, was 50 basis points unfavorable year over year due to lapping lower incentive compensation expense last year and “a slight increase in A&P investment,” while FX and M&A combined were a 10-basis-point headwind.
Segment results show broad sequential improvement
Marberger said three of four segments returned to organic net sales growth, and all segments improved sequentially versus Q2:
- Grocery & Snacks: Net sales of approximately $1.2 billion; organic net sales up 1.8%, driven by strong snacks performance and favorable price/mix, partially offset by lower volumes.
- Refrigerated & Frozen: Net sales of $1.1 billion; organic net sales up 3.6%, driven by nearly 4% volume growth, including market share recovery following last year’s supply constraints.
- International: Organic net sales down 1.2%, an improvement versus Q2; growth in global markets was more than offset by volume softness in Canada, while Mexico was “nearly flat.”
- Foodservice: Organic net sales up 3.6%, the third consecutive quarter of organic growth, with volumes stabilizing and favorable price/mix.
Cash flow conversion raised; guidance narrowed as Ardent Mills weighs on EPS
Connolly said Conagra is “delivering strong free cash flow while maintaining capital allocation discipline,” balancing investment in the business with debt reduction and dividend funding. He said the company is increasing its free cash flow conversion estimate for the year to approximately 105%, up from 100% at CAGNY and 90% at the start of the year. Connolly added this supports reducing net debt by approximately $800 million, above the prior $700 million estimate.
Marberger reported net debt was down by over $800 million versus the prior year, with net leverage ending the quarter at 3.83x, “ahead of our expectations.” He reiterated the company’s long-term leverage target of 3x. Year-to-date capital expenditures were $314 million and dividends paid were $502 million, both largely in line with the prior year. Year-to-date free cash flow totaled $581 million, down from the prior year primarily due to lower operating profit and the lapping of accelerated receivables collection in the prior year.
The company did not repurchase shares and had no additional M&A activity in the quarter. Marberger said Conagra is maintaining its dividend at an annual rate of $1.40 per share.
With one quarter remaining in the fiscal year, management narrowed fiscal 2026 guidance within its prior ranges. Conagra now expects organic net sales near the midpoint of its prior -1% to +1% range and adjusted operating margin near the high end of its approximately 11% to 11.5% range. Adjusted EPS is expected to be approximately $1.70, at the low end of the $1.70 to $1.85 range.
Both Connolly and Marberger attributed the EPS outlook to Conagra’s Ardent Mills joint venture rather than the core business. Connolly said the $1.70 expectation “is not a function of the core business, but rather our Ardent Mills JV.” Marberger said the company is lowering its estimate for adjusted equity earnings to approximately $140 million due to Ardent Mills, reflecting “lower prices and lower volatility in wheat markets” that has pressured commodity trading revenue, while Ardent’s core flour milling results were “broadly in line with expectations.” He added Conagra’s Q4 projection assumes a similar earnings contribution from Ardent Mills as in Q3.
About Conagra Brands (NYSE:CAG)
Conagra Brands, Inc is a leading packaged foods company based in Chicago, Illinois, with a broad portfolio of shelf-stable, frozen and refrigerated foods marketed under familiar brands. The company develops, produces and distributes a wide range of consumer food products, serving both retail grocery and foodservice channels. Conagra’s product lineup includes frozen entrees, snacks, condiments, baking goods and desserts, providing convenient meal solutions for consumers across North America and select international markets.
Among its well-known brands are Birds Eye, Healthy Choice, Lean Cuisine, Marie Callender’s and Banquet in the frozen foods category, as well as Hunt’s sauces, Orville Redenbacher’s popcorn, Slim Jim meat snacks and Reddi-wip toppings.
