Conagra Brands Inc Q3 2025 Earnings Call Summary

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

Question: Andrew Lazar - Barclays Capital Inc - Analyst : <_ALACRA_META_ABSTRACT>Great. Thanks so much. Appreciate it. I guess, Sean, I realize there's still one quarter ago in the fiscal year macro dynamics make for obviously a super challenging environment in which to forecast. I think -- but at CAGNY, you mentioned a few items as it related to fiscal '26, including the higher brand spending already being in the base for next year, 4% on cost of goods is productivity and a 53rd week with the wildcard, I think, being where inflation lands. So I was hoping I guess you could at least bring us through your thoughts even at high -- if high level, on how we're thinking about next year at this stage knowing much is still subject to change. And I guess I asked this in the context of some other sort of fiscal year reporters having already indicated not to expect much growth next fiscal year due to the need for greater reinvestment. Yet in Conagra's case, as you pointed out in the prepared remarks, consumption trends have been steadily improving. So thanks a lot.

Question: Andrew Lazar - Barclays Capital Inc - Analyst : All right. Yes, understood. And then really just second, if you could go into a little more detail on the differential or the gap between shipments and consumption in the grocery, right, grocery space, just because that was the area where there was the biggest differential and frankly came in below what I think many have modelled versus obviously refrigerated and frozen. Thanks so much.

Question: Andrew Lazar - Barclays Capital Inc - Analyst : Got it. Thank you.

Question: Ken Goldman - J.P. Morgan Securities, LLC - Analyst : Just on the subject of Grocery & Snacks. I appreciate it, certain elements of that business, including meat snacks are sold maybe a little more heavily in convenience stores than traditional packaged food. I'm just wondering some of the data that we're getting on C-stores is not ideal right now. I'm just curious if that had any kind of impact versus your prior expectations on any of your products and maybe the overall Grocery & Snacks segment this quarter.

Question: Ken Goldman - J.P. Morgan Securities, LLC - Analyst : Great. I'll pass it on. Thanks, Sean.

Question: Leah Jordan - Goldman Sachs & Company, Inc - Analyst : Good morning, and thank you for taking my question. I know it's a little early still for 2026 guidance as you pointed out, but I just wanted to see if you could comment on your confidence in hitting your leverage target of 3 times by the end of next year. I guess what are the key risks you see at this point it? And how do you think about the contributions from debt paydown versus just an acceleration in the business?

Question: Leah Jordan - Goldman Sachs & Company, Inc - Analyst : Great. Thank you. That's helpful. And then just as we're kind of talking about cash flow, it looks like you lowered your CapEx guidance for this year by about $40 million. Just keen if you could provide more detail on what was removed or delayed from the budget? And really does this mean that we should anticipate a higher-than-normal CapEx next year? And then just maybe while we're on the topic and given we had these recent plant issues, just maybe have you changed how you think about maintenance CapEx at all? Thank you.

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

Question: Tom Palmer - Citi - Analyst : Good morning, and thanks for the question. I guess just to start off, I wanted to ask on the fourth quarter. You noted the persistence of higher inflation, which seems to maybe be a little incremental to 4Q. It sounds like the tariffs, at least the way if you were able to comment on aren't a big swing item, but they probably don't help. And then at least relative to consensus estimates, sales came in a bit light, but you also reiterated your annual outlook. So are there incremental maybe tailwinds to be thinking about when we look towards 4Q that drive that inflection? Thank you.

Question: Tom Palmer - Citi - Analyst : Okay. Thank you for that. Just on the, I guess, import question with tariffs, you noted the veggies from Mexico. Are there other major items we should be thinking about that you traditionally import? And then beyond just, I guess, raw materials, are there finished goods sold in the US that are sourced overseas? Thank you.

Question: Tom Palmer - Citi - Analyst : Great. Thanks, guys. I know it's a very evolving situation. So appreciate the color.

Question: Chris Carey - Wells Fargo Securities, LLC - Analyst : Hey, guys. A quick follow-up on Q4 and then a little bit of a follow-up on the broader macro backdrop. Just in Q4, you said that the shipments would come at a higher cost, but you also expect gross margins to improve in the quarter in Q4 relative to Q3. What's kind of the gap there? Is better productivity, the incremental pricing on protein? Can you maybe just help a little bit more context there?

Question: Chris Carey - Wells Fargo Securities, LLC - Analyst : Okay. And then this is a slightly unfair question, but just following up on the prior line of thinking. When you think about the uncertainty in the current environment going into fiscal '26, how much of that is associated with the top line, the consumer response to this environment relative to your cost structure? I don't know if there's a way to kind of parse that out, but clearly, there's a consumption angle to this, and there's also the kind of tariff and cost angle. And I wonder if there's any way to frame the relative impact of either at this point.

Question: Chris Carey - Wells Fargo Securities, LLC - Analyst : Okay. All right, thanks a lot.

Question: Yasmine Deswandhy - Bank of America - Analyst : Morning, everyone. Thanks for the question. Dave, I just have a question for you and just specifically on cost inflation. In your prepared remarks, you mentioned taking pricing in Hebrew National to offset protein inflation. And I believe there was a comment made previously on the expectation of deflation on crop-based inputs. So I guess at this point, is the expectation for fiscal '26 to be higher than fiscal '25 year to date? Do you just have any updated thoughts there? Thanks.

Question: Yasmine Deswandhy - Bank of America - Analyst : Okay. Great. Thank you. And I just have a quick follow-up, and it's more of a clarifying question off of Andrew's question earlier. So the gap in Grocery & Snacks, some of that is unfavorable mix. Some of that is trade spend. So is the remaining of that mix is it just Swiss Miss? What other products was that, that kind of drove that delta? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 03, 2025 / 1:30PM, CAG.N - Q3 2025 Conagra Brands Inc Earnings Call

Question: Yasmine Deswandhy - Bank of America - Analyst : Okay. Thanks, guys.

Question: Alexia Howard - Bernstein Institutional Services LLC - Analyst : Good morning, everyone. So a couple of quick questions. First of all, can you comment on any recent changes in the state of the consumer and behaviors that are shifting? We've been hearing from others that things might have deteriorated in the last eight weeks or so. I know you mentioned C-stores. Yes, any comments about shifts?

Question: Alexia Howard - Bernstein Institutional Services LLC - Analyst : Thank you. And as a follow-up, I know you've got a lot on your plate right now with everything going on. But there seems to be a lot of activity at the state level to introduce bans or labeling requirements on certain additives. That seems to be bubbling up in a lot of different states now. Is that going to be a major burden, headache for you? Or is it going to be fairly straightforward to accommodate all of that?

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

Question: Megan Clapp - Morgan Stanley & Co. LLC - Analyst : Hi, good morning. Thanks so much. Maybe just a quick follow-up on 4Q. I think the guide maybe implies org sales somewhere around flattish. It looks like consumption, which makes sense just given the supply chain challenges, has trended a bit lower in the most recent period. So as you talked about volumes improving, you're going to get a shipment benefit from the restock of retail inventory. But maybe can you just help us unpack the underlying expectation as it relates to consumptions in the context of flattish shipments in the fourth quarter, that would be helpful. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 03, 2025 / 1:30PM, CAG.N - Q3 2025 Conagra Brands Inc Earnings Call

Question: Megan Clapp - Morgan Stanley & Co. LLC - Analyst : Got it. That's helpful. Thanks. And maybe just a couple of housekeeping items. The -- I don't think I saw an updated guide for leverage for this year. Is it still, I think, 3.55 is what you told us at CAGNY? Or is it may be a bit better given the lower CapEx guide? And then the second would just be on equity-method earnings. I think they were a bit better in the quarter, at least versus what consensus was modeling. Is that just timing? Is 150 kind of still the right number for the year?

Question: Megan Clapp - Morgan Stanley & Co. LLC - Analyst : Okay. Thank you.

Question: Max Gumport - BNP Paribas Securities Corp. - Analyst : Hey. Thanks for the questions. Your snack volumes were up 4% in 3Q, which stands in contrast to what we're seeing for the industry. Really, we're seeing snacking categories under pressure. And I realize your total snack performance was helped by weather as it relates to the Swiss Miss business, but it still looks like your volume growth came from several of your key brands. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 03, 2025 / 1:30PM, CAG.N - Q3 2025 Conagra Brands Inc Earnings Call So I was hoping you could provide a bit more color on what you're seeing in snacking with regard to the broader industry weakness and then what you think is helping your business outperform? Thanks very much.

Question: Max Gumport - BNP Paribas Securities Corp. - Analyst : Great. Thanks very much. I'll leave it there.