Breaking Down Conagra Brands, Inc. (CAG) Financial Health: Key Insights for Investors

You're looking at Conagra Brands, Inc. (CAG) because the consumer staples sector should be a safe harbor, but the financial reality of the last year shows a real fight for profitability that demands a closer look. Fiscal Year 2025, which ended in May, was defintely a challenge, with the company reporting a 13.9% decline in adjusted earnings per share (EPS) to $2.30, and organic net sales dropping 2.9% as inflation eroded consumer buying power. That's a significant hit to the bottom line. Still, management is executing on what they can control, successfully restoring supply chain service levels to 98% and reducing net debt by over $400 million in the subsequent quarter through strategic divestitures. The core question for investors now is whether those operational wins can overcome persistent external pressures like the high cost of goods sold, especially when the market is eyeing the company's high 7.6% dividend yield with skepticism. We need to map out if the 14.1% adjusted operating margin from fiscal 2025 has a floor in the near-term.

Revenue Analysis

The core takeaway for Conagra Brands, Inc. (CAG) in fiscal year 2025 is a clear revenue contraction, with net sales dropping by 3.6% to $11.6 billion from the prior year. This decline signals that volume and pricing power are under pressure, a key risk for investors to defintely watch.

You're seeing the same pattern across much of the packaged food sector: inflation is still high, and consumers are pushing back on price increases by buying less or trading down to private-label brands. For Conagra, this resulted in a 2.9% decrease in organic net sales, driven by lower volumes and an unfavorable price/mix across most segments. That's a direct hit to the top line.

Conagra's revenue streams are split across four main segments, but it's a highly concentrated business. A massive 91% of fiscal 2025 revenue came from the United States, meaning the company is heavily exposed to domestic retail trends. Also, one customer, Walmart and its affiliates, accounted for approximately 29% of consolidated net sales for the year, which is a significant customer concentration risk.

• Frozen food is a primary source, with brands like Marie Callender's and Birds Eye.
• Snacks and shelf-stable staples, such as Slim Jim and Hunt's, provide diversification.
• Foodservice and International segments are smaller but offer growth potential outside of core US retail.

Here's the quick math on how the major segments contributed to the approximate $11.6 billion in net sales for fiscal year 2025 (using TTM data that closely aligns with the full-year figure):

The most significant change impacting future revenue is the strategic portfolio optimization. Post-fiscal year-end, Conagra sold the Chef Boyardee business for $601.2 million. This divestiture, along with a frozen fish business sale, shows management is actively pruning lower-growth, lower-margin assets to focus on core strengths like frozen food and protein-heavy snacks. What this estimate hides is the one-time cash infusion from the sale versus the ongoing revenue loss, which will be visible in the fiscal 2026 results. For a deeper dive into the valuation and strategy, you should read our full analysis on Breaking Down Conagra Brands, Inc. (CAG) Financial Health: Key Insights for Investors.

Profitability Metrics

You're looking at Conagra Brands, Inc. (CAG) and trying to figure out if their operational engine is running smoothly, especially as inflation makes input costs a real headache. My take is direct: Conagra's fiscal year 2025 profitability shows significant margin pressure, but the reported net profit figure is misleadingly high due to a one-time accounting wrap. You need to focus on the adjusted margins to see the true operating performance.

The core issue is that higher-than-expected inflation in the second half of fiscal 2025 outpaced the company's productivity gains, squeezing the gross margin. This is a common story in the packaged food sector right now, but it still requires clear-eyed analysis.

Gross, Operating, and Net Margins (FY 2025)

For the full fiscal year 2025, which ended May 25, 2025, Conagra Brands reported net sales of $11.6 billion, a decrease of 3.6% from the prior year. Here's a breakdown of the key margins, using the adjusted figures for a cleaner view of core business performance, as well as the reported figures:

Here's the quick math on the net profit: The reported Net Income (Net Profit) for fiscal 2025 was approximately $1.145 billion, calculated from the reported diluted Earnings Per Share (EPS) of $2.40 and roughly 477.4 million shares outstanding. That huge 233.3% increase in reported EPS is defintely a headline grabber, but it's mostly due to wrapping (or comparing against) large non-cash goodwill and brand impairment charges from the prior year. The adjusted EPS, which is a better measure of ongoing business health, actually fell 13.9% to $2.30. That's the number that matters.

Operational Efficiency and Industry Context

The operational efficiency story for Conagra Brands in fiscal 2025 is a fight against inflation. The adjusted gross margin compression of 194 basis points to 25.7% tells you that cost of goods sold inflation was a major headwind, outpacing the company's productivity improvements. They are on track to achieve $1 billion in cumulative cost savings by the end of fiscal 2025, with $350 million expected from productivity initiatives, but the external environment is still winning the short-term battle.

When you stack Conagra Brands against the broader industry, their margins look tight. Using trailing twelve months (TTM) data, you see a clear gap:

• Conagra's TTM Gross Margin: 25.5%
• Consumer Staples Industry Average Gross Margin: 33.5%
• Conagra's TTM Operating Margin: 13.83%
• Industry Average Operating Margin: 14.15%

The operating margin is closer to the industry average, which suggests that their Selling, General, and Administrative (SG&A) cost management is relatively efficient, even if the gross margin is lagging. Still, the lower gross margin means they have less cushion to absorb unexpected operating expenses. For a deeper look at the company's strategic focus, you can review their Mission Statement, Vision, & Core Values of Conagra Brands, Inc. (CAG).

The near-term risk is clear: management is guiding for fiscal 2026 adjusted operating margin to decline further to between 11.0% and 11.5%, citing persistent inflation and new tariff impacts. This signals a continued focus on cost discipline and cash flow, but it's a tough road ahead for margin expansion.

Debt vs. Equity Structure

You need to know how Conagra Brands, Inc. (CAG) is funding its operations, and the quick answer is they lean on debt more than their packaged food peers, but they are focused on bringing that leverage down. For the fiscal year ending May 2025, the company's debt-to-equity (D/E) ratio stood at 0.90. This means for every dollar of shareholder equity, the company uses 90 cents of debt to finance its assets. It's a manageable ratio, but it's defintely high for the sector.

Here's the quick math on their financing structure. Conagra Brands, Inc. finished fiscal 2025 with a total debt load of approximately $8.07 billion. This total is split between short-term and long-term obligations, which gives you a clearer picture of their immediate liquidity risk versus their long-term capital structure.

• Short-Term Debt (including current capital leases): $1.83 billion
• Senior Long-Term Debt (excluding current installments): $6.23 billion
• Total Stockholders' Equity: $8.93 billion

This debt-to-equity ratio of 0.90 is significantly higher than the Packaged Foods industry median, which typically sits around 0.2x. This difference is a direct result of the company's acquisition-heavy strategy in the past, particularly the Pinnacle Foods deal, though they have been prioritizing debt reduction since then. The good news is that management reduced net debt by 4.4% during fiscal 2025, ending the year with net debt of $8.0 billion and a net leverage ratio of 3.6x.

In terms of credit quality, Conagra Brands, Inc. maintains an investment-grade rating for its senior long-term debt, which is crucial for keeping borrowing costs in check. Specifically, Moody's affirmed a Baa3 rating for the senior unsecured debt and a Prime-3 rating for its commercial paper in 2025, with a stable outlook. This stability is important because a downgrade would increase the cost of their Revolving Credit Facility and make their commercial paper program more expensive or difficult to access.

The company is actively managing its debt maturity profile. For instance, in July 2025, they issued new senior unsecured notes, a common move to refinance upcoming obligations, including a $1 billion 4.6% senior unsecured note due in November 2025. This is a proactive step to extend their maturity schedule and manage liquidity. On the equity side, their capital allocation strategy balances debt reduction with shareholder returns. They repurchased 2.1 million shares for $64.0 million in fiscal 2025, while also maintaining a quarterly dividend of $0.35 per share. They are definitely threading the needle between deleveraging and rewarding shareholders.

For a deeper dive into who is buying Conagra Brands, Inc. stock and why, you should check out Exploring Conagra Brands, Inc. (CAG) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

When you look at Conagra Brands, Inc. (CAG)'s financial health, the first thing to check is liquidity-can they cover their near-term bills? The numbers for the fiscal year 2025 (FY25) tell a clear story: the company operates with tight liquidity, a common trait for consumer packaged goods (CPG) companies that have efficient inventory turnover.

The Current Ratio for FY25 was 0.71. This ratio measures current assets against current liabilities (debts due within a year). A ratio below 1.0 means current liabilities exceed current assets, suggesting a negative working capital position. The Quick Ratio (or acid-test ratio), which strips out less-liquid inventory, was even tighter at 0.24. That's a low number, honestly.

Here's the quick math on working capital trends: a current ratio of 0.71 defintely means Conagra Brands, Inc. relies on the quick sale of inventory, or access to credit, to meet its short-term obligations. This is a structural risk, but it's partially offset by the predictable, high-volume nature of their business, selling household staples like Slim Jim and Birds Eye.

• Current Ratio (FY25): 0.71.
• Quick Ratio (FY25): 0.24.
• Working Capital: Structurally negative, relying on inventory flow.

The true strength lies in the cash flow statement, which is why you must look beyond the balance sheet ratios. For fiscal 2025, the company generated net cash flows from operating activities (CFO) of $1.7 billion. This is the cash generated from selling products and is the lifeblood of the business. This strong operating cash flow is what ultimately provides the liquidity to service their debt and fund operations, despite the low current ratio.

Cash used in investing activities (CFI) totaled $542.2 million in FY25. This included capital expenditures of $389.3 million-money spent on maintaining and upgrading facilities-plus $230.6 million for cash acquisitions. This shows a commitment to both maintenance and strategic, albeit smaller, growth. Cash flow from financing activities (CFF) was dominated by debt management and shareholder returns. The company paid $669 million in dividends and reduced its net debt by 4.4% to $8.0 billion, which is a clear, positive action for long-term solvency.

The key takeaway for investors is this: Conagra Brands, Inc. has a structural liquidity concern based on traditional ratios, but its powerful and consistent operating cash flow of $1.7 billion provides a major offset and a clear path to manage its debt load. The near-term risk is manageable as long as that CFO engine remains robust. For a deeper dive into the valuation and strategic frameworks, you should check out the full post: Breaking Down Conagra Brands, Inc. (CAG) Financial Health: Key Insights for Investors.

Here's a quick summary of the cash flow picture (in millions USD):

Valuation Analysis

When you look at Conagra Brands, Inc. (CAG) today, the immediate takeaway is that the market views it as a deeply discounted value play, but one facing near-term headwinds. The stock is currently trading at a level that suggests it is undervalued relative to its historical multiples, largely due to a significant price decline over the past year.

The question of whether Conagra Brands, Inc. is overvalued or undervalued hinges on how you weigh its low valuation multiples against its recent stock performance and growth outlook. The market has hammered the stock, pushing it to a 52-week low of $16.60 on November 6, 2025, from a 52-week high of $28.69. In fact, the stock has seen a sharp decline of over 37.03% over the last 12 months.

Here's the quick math on why the stock looks cheap on paper, using estimated 2025 fiscal year (FY) data:

• Price-to-Earnings (P/E) Ratio: The forward P/E for FY 2025 is estimated at just 9.33x, which is significantly lower than the broader Consumer Staples sector average. For context, the trailing twelve months (TTM) P/E is around 9.86x.
• Price-to-Book (P/B) Ratio: At an estimated 1.2x for FY 2025, the stock is trading very close to its book value, a classic sign of a deeply discounted stock.
• Enterprise Value-to-EBITDA (EV/EBITDA): The FY 2025 estimate is a modest 8.4x, or 8.10x on a TTM basis. This multiple, which accounts for debt, suggests the company is cheap compared to peers and its own historical average.

These low multiples defintely suggest the stock is undervalued, but what this estimate hides is the market's concern over organic sales growth and margin pressure, which explains the stock price drop.

The dividend story is compelling, but you need to watch the payout ratio. Conagra Brands, Inc. offers a high annualized dividend of $1.40 per share, which translates to a robust dividend yield of about 8.02% based on recent prices. However, the dividend payout ratio sits at approximately 78.7%, meaning nearly four-fifths of its earnings are going back to shareholders. That's high, and while it's great for income investors now, it leaves less room for error or for reinvestment into the business.

Wall Street is cautious. The analyst consensus as of November 2025 is a clear Hold, or in some reports, a more negative Reduce. Out of 14 analysts, 10 currently recommend a Hold, 3 a Sell, and only 1 a Buy. Their average 12-month price target ranges from $20.33 to $21.92, suggesting an upside of around 16.50% to 25.99% from the current price. The market is saying: wait and see if they can execute on their turnaround plan before committing new capital. Before making a decision, it's always smart to review the core strategy: Mission Statement, Vision, & Core Values of Conagra Brands, Inc. (CAG).

The valuation table below summarizes the key data points you should be focused on:

Your next step should be to look past the multiples and focus on the cash flow: specifically, how much of that $1.40 dividend is truly covered by free cash flow, not just reported earnings.

Risk Factors

You need a clear-eyed view of Conagra Brands, Inc. (CAG)'s risk profile, because the near-term challenges-mostly operational and inflationary-directly pressured the bottom line in fiscal year 2025 (FY2025). The company's full-year adjusted earnings per share (EPS) landed at $2.30, a 13.9% decrease from the prior year, showing just how intense the headwinds were.

The core issue is that external cost pressures and internal supply hiccups are defintely making it hard to grow the top line. For FY2025, net sales decreased 3.6% to $11.6 billion, with organic net sales down 2.9%. This drop was largely volume-driven, which means consumers bought less product. Here's the quick math: lower volume plus higher costs equals margin compression. That's a brutal combination.

Operational and Financial Headwinds

The most immediate risks in FY2025 stemmed from the supply chain, which hit the high-growth frozen segment hard. Issues with product quality inconsistencies at a primary chicken preparation facility forced Conagra Brands, Inc. to temporarily halt and then slow production for frozen meals containing chicken. This, along with supply constraints in frozen vegetables, caused customer service interruptions and lost volume. The company's net leverage ratio (total debt to EBITDA) also ticked up to roughly 3.55x, exceeding its long-term target of 3.0x, which adds a layer of financial risk.

For investors, a key strategic risk is the market's concern over the dividend. With flat sales and margin pressure, analysts are questioning the sustainability of the high dividend yield, which was recently running around 7.6%. A dividend cut, while not currently announced, would be a major negative catalyst for the stock.

• Inflationary Costs: Persistent cost of goods sold (COGS) inflation, particularly in animal proteins (beef, pork, turkey), continues to squeeze gross margins.
• Tariff Exposure: The company faces an estimated 3% addition to its annual costs due to U.S. tariffs on imported materials like tin plate steel and aluminum.
• Consumer Value-Seeking: A challenging macroeconomic environment is driving consumers to prioritize affordability, intensifying competition and pressuring Conagra Brands, Inc. to balance pricing with volume.

Mitigation Strategies and Clear Actions

Management is not sitting still; they are actively deploying capital and operational fixes to counter these risks. The strategy is two-pronged: fix the operational bottlenecks and strengthen the balance sheet. On the operational side, they are investing in capacity expansion for frozen meals and vegetables, with modernization upgrades for the chicken facility expected to be completed by the end of the first quarter of fiscal 2026.

Financially, the company is focused on disciplined cost management and debt reduction. They delivered strong productivity gains-over 5% of COGS in Q1 FY2026-though these were initially offset by inflation and lower sales. They also used divestiture proceeds, including those from selling Chef Boyardee and frozen seafood businesses, to reduce net debt by more than $400 million in Q1 FY2026. This is a smart move to lower interest expense and free up cash flow.

For a deeper dive into who is buying and selling the stock, you should check out Exploring Conagra Brands, Inc. (CAG) Investor Profile: Who's Buying and Why?

The action for you right now is to monitor the Q2 FY2026 earnings report for evidence that the capacity expansion is fully restoring service levels and if those strong productivity gains are finally starting to outpace the core inflation rate.

Growth Opportunities

You're looking at Conagra Brands, Inc. (CAG) and asking the right question: where does the growth come from when the near-term financials look challenging? The direct takeaway is that future growth isn't about massive top-line expansion right now; it's about margin recovery and strategic portfolio refinement, plus a calculated push into high-growth consumer trends.

The company wrapped up fiscal year 2025 with reported net sales of $11.6 billion, a 3.6% decrease, and adjusted earnings per share (EPS) falling 13.9% to $2.30. Still, the strategic moves made this year-especially in product innovation-set the stage for a different narrative. They're not chasing volume; they're chasing better margins.

Strategic Portfolio and Product Innovation

Conagra Brands is actively reshaping its portfolio, which is a key growth driver. This isn't just selling off old brands; it's a focused effort to align with what consumers are buying next. For example, in fiscal 2025, the company acquired FATTY Smoked Meat Sticks, which strengthens its position in the high-growth, high-margin meat stick category. Conversely, they divested non-core assets, including selling their frozen seafood brands, Van de Kamp's and Mrs. Paul's, for $55 million in June 2025.

The biggest near-term opportunity is in innovation, specifically in the refrigerated and frozen segment. In June 2025, Conagra Brands launched over 50 new frozen food products across core brands like Healthy Choice, Birds Eye, and Marie Callender's. This move directly targets consumer demand for plant-based, gluten-free, and globally-inspired convenient meals. Plus, they are working to eliminate certified food, drug, and cosmetic colors from their U.S. frozen portfolio by the end of 2025, which aligns with the 'clean label' trend and builds consumer trust.

• Launch over 50 new frozen products in 2025.
• Acquired FATTY Smoked Meat Sticks for high-growth category.
• Divested non-core seafood brands for $55 million.

Future Revenue and Earnings Projections

Looking ahead, the company's guidance for fiscal year 2026 reflects a period of stabilization and margin pressure from ongoing inflation, but also a focus on execution. Here's the quick math on their projections, which suggests a flat-to-slight growth scenario on the top line, but a notable dip in earnings as they navigate costs and investments.

The company is managing expectations for fiscal 2026, projecting organic net sales growth to be between -1% and +1% compared to fiscal 2025. This flat forecast is a realist view, but it's crucial to see the underlying margin work. The adjusted operating margin is anticipated to be between 11.0% and 11.5%, and adjusted EPS is projected to land between $1.70 and $1.85. The goal is to drive long-term sustainable growth, not a quick, unsustainable spike. One clear action is their productivity initiatives, which are on track to deliver $1 billion in cost savings by the end of fiscal 2025.

Competitive Advantages and Expansion

Conagra Brands' competitive advantage is its strong portfolio of iconic, well-established brands in the frozen and snacking categories-Slim Jim, Birds Eye, and Healthy Choice are household names. They are positioned well in the 'permissible snacking' segment, which focuses on low-carb, protein-forward options that are trending with consumers. This focus on consumer-driven segments helps them gain market share even when the overall environment is tough. Also, they have a massive opportunity for market expansion: only about 9% of their fiscal 2025 revenue came from international markets, which means there's significant untapped global potential to diversify their revenue base. Their commitment to innovation and brand-building is what will defintely keep them competitive against peers. For more on the company's core principles, you can review the Mission Statement, Vision, & Core Values of Conagra Brands, Inc. (CAG).

Finance: Track CAG's quarterly organic net sales growth against the -1% to +1% guidance to gauge the success of new product launches.