Conagra (NYSE:CAG) Misses Q3 Sales Targets
Packaged foods company Conagra Brands (NYSE:CAG) fell short of the market’s revenue expectations in Q3 CY2024, with sales falling 3.8% year on year to $2.79 billion. Its non-GAAP profit of $0.53 per share was also 11.3% below analysts’ consensus estimates.
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Conagra (CAG) Q3 CY2024 Highlights:
- Revenue: $2.79 billion vs analyst estimates of $2.84 billion (1.6% miss)
- EPS (non-GAAP): $0.53 vs analyst expectations of $0.60 (11.3% miss)
- EPS (non-GAAP) guidance for the full year is $2.63 at the midpoint, roughly in line with what analysts were expecting
- Gross Margin (GAAP): 26.5%, down from 28.5% in the same quarter last year
- EBITDA Margin: 18.9%, down from 20% in the same quarter last year
- Free Cash Flow Margin: 4.9%, down from 10.3% in the same quarter last year
- Organic Revenue fell 3.5% year on year (-0.3% in the same quarter last year)
- Sales Volumes fell 1.6% year on year (-6.6% in the same quarter last year)
- Market Capitalization: $15.67 billion
Company Overview
Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE:CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.
Shelf-Stable Food
As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.
Sales Growth
Conagra is one of the larger consumer staples companies and benefits from a well-known brand, giving it customer mindshare and influence over purchasing decisions.
As you can see below, the company’s annualized revenue growth rate of 2.3% over the last three years was sluggish as consumers bought less of its products. We’ll explore what this means in the "Volume Growth" section.
This quarter, Conagra missed Wall Street’s estimates and reported a rather uninspiring 3.8% year-on-year revenue decline, generating $2.79 billion in revenue. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.
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Volume Growth
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
To analyze whether Conagra generated its growth (or lack thereof) from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.
Over the last two years, Conagra’s average quarterly sales volumes have shrunk by 3.1%. This isn’t ideal for a consumer staples company, where demand is typically stable. Luckily, Conagra was able to offset fewer customers purchasing its products by charging higher prices, enabling it to maintain its organic sales. We hope the company can grow its volumes soon, however, as consistent price increases (on top of inflation) aren’t sustainable over the long term unless the business is really really special.
In Conagra’s Q3 2025, sales volumes dropped 1.6% year on year. This result was a step in the right direction compared to its 6.6% year-on-year decline 12 months ago.
Key Takeaways from Conagra’s Q3 Results
We struggled to find many strong positives in these results. Its organic revenue unfortunately missed analysts’ expectations and its EPS missed Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 2.9% to $31.75 immediately following the results.
Conagra underperformed this quarter, but does that create an opportunity to invest right now?The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy.We cover that in our actionable full research report which you can read here, it’s free.
