Conagra is staying the course with its earnings expectations for the fiscal year, following a mixed second quarter that missed analyst predictions and resulted in a $968 million impairment charge due to declining share price and market capitalization.
The decline in Conagra’s share price and market cap over several quarters triggered the company to reassess its overall value, which is typically performed at the end of the fiscal year, according to Conagra CFO Dave Marberger.
Marberger said in the earnings call that the reassessment prompted Conagra to raise the discount rate – a move that signals investors now require a higher return/risk premium – rather than slashing the business outlook for the year.
“Obviously, we made the decision to increase our discount rate, so a lot of our forecasts were the same, and as you see, we’re holding our guidance, so we feel good about where the business is going. It’s in line with expectations. But because we changed our discount rate, that drove the impairment,” he said, adding that the move merely marks the book down to the fair value.
Conagra outlook intact
Conagra, which maintains a broad portfolio of well-known brands, such as Birds Eye, Healthy Choice, Marie Callender’s, Slim Jim, Duncan Hines and Hunt’s, missed analyst expectations in the second quarter, causing its stock price to dip by about 2% by mid-afternoon on Friday.
The food giant reported $0.45 per share on revenue of $2.98 billion, a mixed result on consensus earnings expectations of $0.44 per share on revenue of $3 billion, according to Earnings Whispers.
Despite the massive impairment charge and underwhelming earnings results, Conagra remains upbeat about the remainder of the fiscal year, which it expects earnings of $1.70 to $1.85 per share on revenue of $11.5 billion to $11.73 billion.
“I like what I’m seeing so far in December,” said Conagra President and CEO Sean Connolly during the company’s earnings call. “And I like where we sit going into the second half here with some momentum. We don’t provide formal quarterly guidance, but I will say that overall, we do expect organic net sales growth in the second half.”
Snacks, frozen on the right track
Conagra is continuing to invest margin by offering price cuts throughout the year. This strategy, Connolly said, aims to build on the momentum the company is seeing in its frozen foods and snacks sectors.
“We built our plan to invest margin for continued upward volume inflection in frozen and snacks,” Connolly said. “And coming into the year when we built the plan, we fully understood the cost of that inflection from last year, when we strung together six straight quarters of consistent volume progress prior to running into those temporary supply constraints in frozen.”
He said snacks have experienced “extremely strong growth,” particularly in the Slim Jim and Fatty brands, adding that Conagra has a robust snacks marketing plan ready for the second half of the fiscal year.
Conagra’s frozen segment in Q2 a year ago outperformed the company’s most recent quarter. Connolly said this was due to “a blockbuster frozen quarter” last year.
“Our goal this quarter in frozen was to reclaim the market share that we basically loaned out to a competitor when we had supply constraints beginning last winter, and as you can see in the market share charts today, we clawed back almost all of that,” he said.
Inflation and tariff struggles
Conagra also maintained its outlook on inflation, pegging core inflation pressure at just above 4% for the year and tariff-related inflation at about 3%, totaling 7% for the year.
“We’ve seen favorability in chicken, but we’re forecasting increased cost in beef and pork, and so we have some offsets there,” Marberger said. “We see some favorability in tariffs, but remember, more than 50% of our tariff exposure is on tin plate, and there’s been no change to those tariff levels.”
He noted that some tariffs have come down, reducing pressure on the company, and concluded, “So it’s not a significant impact on the overall year.”
The value of Conagra meals still outperforms other options in the market, such as quick-service restaurants, according to Connolly “You have to remind consumers of that,” he added.
That’s driving innovation at Conagra, Connolly said.
“Some of our innovations coming this year will be more value oriented, and our marketing messages will be value oriented,” Connolly said. “We think, given the inflection we’ve already got, that will continue to push some of the light or lapsed users back into the franchise and continue to help drive our organic sales growth.”
Health and wellness on the menu
That innovation will also focus on health and wellness, according to Connolly.
“The definition of ‘What does good health and wellness food look like in 2026?’ is different than it looked 10 years ago, which is different than it looked 20 years before that,” he said. “So right now, health and wellness is heavily, as everybody knows and can see, about protein.”
The quest for more protein is driving product development at Conagra, he said. Clean-label products and vegetables as a source of nutrition are also points of focus for the food giant. That means a greater push on Birds Eye vegetables, meat sticks and seeds, he said.
“And you think about our frozen businesses like Healthy Choice, which are incredibly clean label, incredibly healthy, high in protein, low in sugar, low in carbs, things like that, it’s very well positioned,” he said.
