Conagra (CAG +1%) reported Q3 earnings and revenue that fell short of expectations but were better than anticipated. Known for brands like Slim Jim and Hebrew National, Conagra faced unexpected supply chain issues in Q3, leading to a temporary halt in chicken production for frozen meals. Demand for frozen vegetables exceeded expectations, causing inventory constraints and impacting volume, net sales, and profit opportunities.

Despite shares hitting 52-week lows due to reduced guidance, the main issue was supply, not demand. This is noteworthy as peers like PepsiCo (PEP, Financial) and General Mills (GIS, Financial) have reported snacking weaknesses linked to declining consumer confidence.

• Snacking demand remained strong, contributing to a positive market response despite weak Q3 results. Consumption trends were robust, but shipments were affected by supply chain issues, leading to an adjusted EPS of $0.51 and revenue of $2.84 billion, a 6.3% year-over-year decline (5.2% drop on an organic basis), missing analyst forecasts. Net sales in the Refrigerated & Frozen segment fell 7.2% year-over-year with a 3.0% volume decrease.
• Other segments showed slight improvement but were still impacted by economic challenges. Grocery & Snacks saw a 3.2% year-over-year net sales decline due to a 1.3% volume decrease, although volume share increased in categories like popcorn and canned tomatoes. Foodservice net sales dropped 6.1% due to weak commercial traffic. International net sales fell 17.6%, with FX headwinds cutting off 8.5 points.
• Conagra maintained its FY25 guidance, targeting an adjusted EPS of $2.35 and organic net sales growth of around negative 2.0%. The company remains vigilant amid a dynamic external environment, including tariffs, regulatory changes, inflation, and shifts in consumer sentiment.
  • Conagra anticipates being affected by tariffs on tin mill, steel, aluminum, and Chinese imports, though the impact should be limited in Q4 as it works through existing inventory. More clarity is expected after Q4 results in July.

Q3 results were largely anticipated following earlier guidance adjustments due to supply chain issues. Investors remain cautiously optimistic, awaiting further tariff developments. Conagra's stock may remain stable until Q4 results in July.