Conagra Brands Inc Q2 2026 Earnings Call Transcript

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

Question: Andrew Lazar - Barclays Services Corp - Analyst : Happy holidays, everybody. Sean, maybe to start off, you've mentioned in the prepared remarks that you're seeing some of the delayed shipments materialize in December. On top of this, you've got easier comparisons starting in frozen, a return to full merchandising and a full innovation slate that you've talked about, and then some pricing in staples brands with so far expected elasticity. So I guess all in, would you be expecting positive year-over-year organic sales in fiscal 3Q? Or are there other things in the third quarter that we need to keep in mind?

Question: Andrew Lazar - Barclays Services Corp - Analyst : Great. And then earlier this week, Sean, another food company mentioned a higher cost of volume as shoppers are increasingly sort of waiting to buy more of their needs on promotion. It's not that depth or frequency had changed much. It's just amount of product being sold on deal. And it's partially for them, at least, seems to be coming at the expensive base or sort of full price volume. I'm just curious if you're seeing the same thing at this point or expect to? You have some vagaries obviously, because you're getting back to full merchandising in the back half that you didn't have last year. But just trying to get a sense of what you're seeing more broadly in the industry with regard to that sort of dynamic.

Question: Thomas Palmer - JPMorgan Chase & Co - Analyst : First, I just wanted to, I guess, clarify on the annual outlook. You reiterated sales and operating margin. You did take down Ardent. I think the $30 million is around $0.05 to EPS if I'm doing the math right. So I guess I'm just trying to bridge, I know there is a range here, but is there something that kind of helps to -- elsewhere in the P&L that helps to make up for Ardent?

Question: Thomas Palmer - JPMorgan Chase & Co - Analyst : Okay. And look, I appreciate more coming here in calendar '26. But I want to just ask on Project Catalyst. As we think about its potential impact and implementation, should we be thinking about like in some past programs, you've had very clear cost savings targets? And then any sort of like stepped-up spending, be it CapEx related or other types of investments that we should start thinking about?

Question: Peter Galbo - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Sean, I just wanted to get your perspective. You've now had two of your largest peers not only talk about but start to enact price cuts? And just asking kind of for your crystal ball into the back half of fiscal '26 and even into early '27, just what that potential activity from some of your largest peers could mean for the group? And how you think it translates to some of the actions you all may need to take obviously, considering that you've announced some pricing in some of the staples portfolio. So would just love your perspective on that, please. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 19, 2025 / 2:30PM, CAG.N - Q2 2026 Conagra Brands Inc Earnings Call

Question: Peter Galbo - Bofa Merrill Lynch Asset Holdings Inc - Analyst : No, I think you hit it, Sean. Very, very comprehensive. Dave, I was hoping to ask a follow-up around just the inflation guidance. I think you talked about maybe -- and apologies if I missed it, but you talked about some favorability in the quarter. You've mentioned things like chicken. Just where is inflation running? Like where did we run in the first half and maybe in the second quarter specifically? And then how we think about that in the context of the 7% for the year.

Question: Peter Galbo - Bofa Merrill Lynch Asset Holdings Inc - Analyst : And Dave, just -- sorry, for clarification, you ran at about 5% gross inflation in the second quarter if I look at slide 24.

Question: Max Gumport - Exane Bnp Paribas - Analyst : Your prepared remarks mentioned that 3Q operating margins are expected to be below 2Q levels due to A&P and then also some absorption headwinds associated with reducing inventory. I realize you've framed A&P is going to over 3% of sales in 3Q. But is there any way to size the magnitude of the absorption headwind that you'll see in 3Q?

Question: Max Gumport - Exane Bnp Paribas - Analyst : Great. And then longer-term question. Just looking back at your gross margin over time, clearly, it was running in the high 20% pre-COVID look set to end this year around the 24% level also, several hundred basis points below historical levels. And I recognize there's reasons for that. There's some investments you've made this year that you're -- and there's also meaningful inflation that you're not offsetting with price given the consumer environment. I'm just wondering as we look out over the next several years, is there anything that you're seeing that would prevent you from getting back to a high 20% gross margin level?

Question: Robert Moskow - Cowen and Company LLC - Analyst : Dave, I wanted to ask about the assumption of a 100 basis point headwind in 2Q and the extent to which it can reverse in the third quarter. because some of it, it sounds like it's the thought that retailers are just not ordering as much. And in relation to consumption. And then LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 19, 2025 / 2:30PM, CAG.N - Q2 2026 Conagra Brands Inc Earnings Call they're going to do it in the third quarter because they don't have to worry about the SNAP issues or other issues. But retail inventories have been notoriously difficult to predict. Is there a risk here that retailers just decide to go forward with less inventory than normal for the rest of the year just because they want to be more efficient. And if so, is it maybe more so in the frozen area than the shelf stable?

Question: Alexia Howard - Sanford C Bernstein & Co LLC - Analyst : Can I ask about innovation? Firstly, are there any numbers you can put around where you're at? And I assume that you're now significantly above where you were a few years ago during COVID. Are you now at a sort of level that you feel comfortable with, maintaining, or is there more increase to come? And then sticking with the innovation theme, I wanted to ask about how you're leaning into the health and wellness trends. It seems as though there's a lot of health and lower themes going on out there. Walmart has said that they're going to eliminate 30 additives for the whole of their private label portfolio. We've got potential food labeling front-of-pack legislation coming in dietary guidelines coming up as well. I remember you talking about GLP-1 on pack labels. How is that going? And what are the priorities from here? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 19, 2025 / 2:30PM, CAG.N - Q2 2026 Conagra Brands Inc Earnings Call

Question: Leah Jordan - Goldman Sachs Group Inc - Analyst : So you're stepping up your A&P spend in the back half. Just any color on how we should think about the balance between the two quarters? And with the step-up and the fact that you're calling out the consumers are still value seeking, has anything changed in your approach for this spend, be it across categories, channels or frequency, anything there?

Question: Leah Jordan - Goldman Sachs Group Inc - Analyst : Okay. Great. And then I just have one quick follow-up on the weather piece in the quarter, specifically around related to the slow start to winter. Now that we've shifted to much colder weather across the US. Just seeing if there's any color or commentary around quarter-to-date trends. Have those normalized with your expectations? Or anything to think through there?

Question: Megan Alexander - Morgan Stanley & Co Ltd - Analyst : I just had a quick follow-up to Tom's question earlier on the EPS outlook. You mentioned you seemed confident on offsetting the shortfall from Ardent. The range is still quite wide. Sean, you mentioned it was wider than normal coming into the year. So can you just help us understand what are kind of the key swing factors or uncertainties that remain that justify keeping the EPS range wider now that we are halfway through the year rather than narrowing it?

Question: Megan Alexander - Morgan Stanley & Co Ltd - Analyst : Okay. And then maybe just another follow-up on, I think it was Andrew's question at the beginning. So you talked about in the slides and in your prepared remarks the two-year consumption trends in refrigerated and frozen inflecting back to positive. We know that the reported numbers are pretty noisy. And I know you don't want to provide guidance, but as we look to Q3 and just consider the momentum you're seeing in consumption on a two-year basis and all of these timing shifts and what we'll see in terms of the shipment timing benefit. Would you expect that two-year reported trend in RNF to accelerate versus the first half? I'm just trying to get a sense because the Street does imply a bit of a deceleration. So just trying to understand how to think about that segment in particular, given the noise.

Question: Chris Carey - Wells Fargo - Analyst : Just regarding the inflation for this year. Like there's some puts and takes, but it's basically tracking to where you thought. Is there any reason why it shouldn't be back in that 2%-ish range going into next year based on what we can see today? Are there anomalies with the timing of some of the pork and beef inflation that you're seeing? Are there tariff carryover into next year with inventory I think the comment was we'd like to get back to that range over time, but I just wondered if there were anomalies that you're thinking about that would prevent you from getting there going into next year.

Question: Chris Carey - Wells Fargo - Analyst : Okay. We'll see how it goes. Just from a portfolio standpoint, a little bit bigger picture, we've seen a ton of activity in the food sector with portfolio changes, separations, combinations and actually in broader staples as well, we've been outside of food. When you think about what's going on in the environment right now, can you just give us the latest on Conagra's approach to its portfolio, how you think through LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 19, 2025 / 2:30PM, CAG.N - Q2 2026 Conagra Brands Inc Earnings Call portfolio opportunities one way or the other? And just how the balance sheet and your leverage targets factor into your medium-term objectives. Just any context would be helpful.