Conagra Brands Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Lazar - Barclays - Analyst : Good morning, everyone. Happy holidays. Sean, we saw, I guess, during the course of the quarter sort of a little bit of a gap open up between sort of scanner and sort of Conagra shipments. I'm just curious if you saw any benefit from the Thanksgiving timing change on volume in the quarter that you would expect to reverse in the third quarter, just given others with sort of similar fiscal years have kind of discussed this dynamic.

Question: Andrew Lazar - Barclays - Analyst : Thanks for that clarity. And then, you talk about incremental inflation and FX as the key reasons for some of the back half EPS pressure versus previous expectations. Is incremental investment, whether consumer or trade, part of this as well? And I ask because it would seem you are seeing a return on some of the spending with the volume and share trends that you spoke of in the prepared remarks. And we continue to hear about the consumer being more value-seeking for longer than mainly expected. So I'm just trying to get a sense if that is sort of part of the dynamic around estimate changes for the back half of the year or not. Thanks so much.

Question: Andrew Lazar - Barclays - Analyst : Thanks for the clarity.

Question: Ken Goldman - J.P. Morgan Securities LLC - Analyst : Hi. In discussing the industry's higher investments in advertising, promo trading, and innovation, Sean, you said the consumer response has varied significantly by category and company. I'm hoping to kind of unpack this a bit. From your vantage point, are there any best practices, perhaps, that can maybe thoughtfully be applied to the industry as a whole, just given some of those consumer challenges or those value-seeking behaviors?

Question: Ken Goldman - J.P. Morgan Securities LLC - Analyst : Thanks. Happy holidays.

Question: Chris Carey - Wells Fargo Securities, LLC - Analyst : Hi. Good morning, everyone. Can you just perhaps expand on your leverage targets for the full year inching up a bit? Free cash flow conversion looks like it's coming in better. What's driving that? The leverage kicking up a bit, I assume, is more about profit as opposed to debt paydown. Can you just update us on, I guess, visibility on free cash flow, how quickly you think you can get to your leverage targets, and in general, how you're thinking about cash deployment maybe over the next year and perhaps over the next several years between the dividend and share repurchases and, of course, M&A? Thanks.

Question: Chris Carey - Wells Fargo Securities, LLC - Analyst : Okay. Thanks so much.

Question: Thomas Palmer - Citi - Analyst : Good morning. Thanks for the question. I wanted to ask -- the presentation indicates that the third-quarter operating margin is expected to be the lowest of the year. I think this would then imply that 4Q would be the highest of the year. So I just want to make sure I kind of understand the key drivers of this expected inflection come 4Q. I know there is some incremental pricing. Are the investments you noted for the third quarter expected to taper off in the fourth quarter? Just any help on that inflection. Thanks.

Question: Thomas Palmer - Citi - Analyst : Thank you.

Question: Peter Galbo - BofA Global Research (US) - Analyst : Hey, guys. Good morning. Sean, I just wanted to ask -- I know you said there was no Thanksgiving kind of timing benefit to the quarter, but slide 15, you have the Staples portfolio, with several of the brands that were kind of growing double digits. So just wondering if there was any hurricane impact in the quarter maybe that helped benefit some of the shipments that might not repeat and, if so, if you could just quantify that for us. Thanks very much.

Question: Robert Moskow - TD Cowen - Analyst : I think the Lamb Weston call took all the energy out of the sell side, so I'm going to try to inject a little more into this one. So Sean, you've raised your inflation guidance just a little bit, and it's had a pretty substantial impact to your earnings outlook. Is it more difficult than normal to put through pricing to offset higher costs because of where the consumer is right now? And I know you -- I know the guidance assumes that these costs come right back down again, but some of them look a little sticky, particularly cocoa. So what happens if those costs stay high into fiscal '26?

Question: Robert Moskow - TD Cowen - Analyst : Thank you.

Question: Alexia Howard - Bernstein Institutional Services LLC - Analyst : Good morning, everyone. Just taking a little bit of a different tack, you announced your Healthy Choice GLP-1 on track messaging recently. Can you talk about what insights you've gathered from that segment and plans for maybe expanding that program over time?

Question: Alexia Howard - Bernstein Institutional Services LLC - Analyst : Great. Thank you very much. I'll pass it on.

Question: Max Gumport - BNP Paribas Exane - Analyst : Hey. Thanks for the question. And this might be stealing the thunder from your upcoming CAGNY presentation, it sounds like. But Sean, you touched on the move within snacking to protein and healthy snacks. And really, that's a microcosm for what we're seeing in the broader packaged food industry this year. You've got higher protein categories like nutrition shakes, cottage cheese, Greek yogurt, all leading on the growth side, and then you've got unhealthy snacking categories that are showing larger declines. In your view, what's driving this trend, and how long do you think it can persist? Thanks.

Question: Max Gumport - BNP Paribas Exane - Analyst : Great. Thanks very much.

Question: Rob Dickerson - Jefferies - Analyst : Great, thanks. Just a quick easy question. I might be wrong, but I thought Q2 was supposed to be the highest spend for the year, just in terms of advertising and promotion. But then I also hear maybe there's a little bit more trade going into Q3 and I heard a little time shift. And then also, I think you said total SG&A and ad and promo would be the same in Q3 relative to last year's Q3, right, which implies Q3 is higher. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 2:30PM, CAG.N - Q2 2025 Conagra Brands Inc Earnings Call So was there anything that just occurred in the quarter where you say, okay, hey, we might have a few new innovations that might have slipped into Q3, so maybe we'll also shift some of that ad and promo, or maybe we want to promote a little bit more in December into the holidays. Just trying to gauge kind of the, I guess it's seasonality to a certain extent on ad and promo, but just kind of how you're thinking about that as we move through Q3.

Question: Rob Dickerson - Jefferies - Analyst : Okay, perfect. No, that was great. Thank you.

Question: Leah Jordan - Goldman Sachs & Company, Inc. - Analyst : Good morning. Thank you for taking my question. Seeing if you could comment on the competitive environment in frozen. A large peer has talked about adding capacity in the category and stepping up some investments to support its growth. So just seeing if you have seen any shift in behavior yet and how you think these changes could impact your ability to continue to drive volume improvement going forward.

Question: Leah Jordan - Goldman Sachs & Company, Inc. - Analyst : Thank you.