Research Update: Conagra Brands Inc. 'BBB-' Issuer Credit Rating Affirmed; Outlook Stable; 'A-3' Commercial Paper Rating Affirmed

U.S.-based Conagra Brands Inc.'s EBITDA performance in the fourth quarter ended May 26, 2019, missed our expectations by around 10% due mainly to intensifying competition in certain canned and frozen categories, the impact of product recalls, and lower Ardent Mills joint venture distributions. We are affirming our 'BBB-' issuer credit rating on the packaged foods firm because we believe performance will improve in the second half of fiscal 2020 when substantial innovation hits shelves, and because significant Pinnacle Foods Inc. cost synergies should materialize this year. We are also affirming the 'A-3' short-term rating and commercial paper rating. We are also tightening our adjusted leverage downgrade trigger by 0.5x to 4.5x from around 5x to account for the combined business

...- U.S.-based Conagra Brands Inc.'s EBITDA performance in the fourth quarter ended May 26, 2019, missed our expectations by around 10% due mainly to intensifying competition in certain canned and frozen categories, the impact of product recalls, and lower Ardent Mills joint venture distributions. - We are affirming our '###-' issuer credit rating on the packaged foods firm because we believe performance will improve in the second half of fiscal 2020 when substantial innovation hits shelves, and because significant Pinnacle Foods Inc. cost synergies should materialize this year. We are also affirming the 'A-3' short-term rating and commercial paper rating. - We are also tightening our adjusted leverage downgrade trigger by 0.5x to 4.5x from around 5x to account for the combined business thus far underperforming our expectations. - The stable outlook reflects our expectation that Conagra's EBITDA will stabilize in fiscal 2020 and strengthen in fiscal 2021 such that adjusted leverage will fall...

Research Update