CAG: Bearish Signals Point to Potential Put Play

Conagra Brands is a North American branded food company offering a variety of products through its Grocery & Snacks, Refrigerated & Frozen, International, and Foodservice segments. Core brands include 'Birds Eye', 'Duncan Hines', 'Healthy Choice', 'Marie Callender's', 'Reddi-wip', 'Slim Jim', and 'Angie's BOOMCHICKAPOP'. The company targets retail food and foodservice channels, selling to grocery stores, restaurants, and other foodservice establishments. Conagra competes on the basis of quality, product innovation, value, customer service, brand recognition, and brand loyalty. The company also licenses intellectual property, such as the 'Alexia' and 'Marie Callender's' trademarks, to third parties. Conagra's strategy focuses on delivering sustainable, profitable growth with strong returns on invested capital.

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CAG's technical outlook is bearish, with a score of 0.25. The stock has been in a downtrend over the past 90 days, falling from approximately $20.47 on June 30, 2025, to $17.105 as of November 4, 2025. The price is below its 50-day SMA (18.61) and 200-day SMA (21.88), confirming the downtrend. Momentum indicators are also bearish; the MACD is negative (-0.337), and the RSI is at 34.67, indicating oversold conditions, but also sustained downward pressure. The ADX is at 23.24, suggesting a strengthening downtrend. The STOCHk is at 17.56, which is low, but not enough to counteract the prevailing negative signals. The recent price action confirms the bearish sentiment, with the stock failing to sustain any significant rallies. Given these factors, the likelihood of continued downward movement over the next 1-3 months appears high. The stock is also trading below the EMA 21 of 18.13. The BBP is at 0.03, indicating that the price is very close to the lower Bollinger Band, which could signal further downside.

Conagra Brands' first quarter of fiscal 2026 reveals a challenging landscape. `Net sales` decreased by 5.8% year-over-year, from $2,794.9 million to $2,632.6 million, driven by declines in the Grocery & Snacks and International segments. The company attributes this to 'continued lower consumption trends' and unfavorable foreign exchange rates. The Refrigerated & Frozen segment saw a slight decrease of 0.9%, while Foodservice decreased by 0.8%. The company sold the Chef Boyardee and frozen fish businesses in the first quarter of 2026. Segment operating profit also declined in Grocery & Snacks, Refrigerated & Frozen, and Foodservice. While the MD&A does not provide a gross profit margin directly, it states 'overall gross profit decreased primarily due to the impacts of lower net sales, input cost inflation, and a reduction in profit from divested businesses, partially offset by productivity.' Cash flow from operating activities decreased significantly, from $268.6 million to $120.6 million, due to 'lower operating profits and higher inventory balances'. Management expects 'inflation and tariffs to negatively impact our costs of goods sold in fiscal 2026' and anticipates 'weak consumer sentiment to continue to negatively impact our volumes during fiscal 2026'. This paints a picture of cost pressures and softening demand, suggesting continued headwinds in the near term.

Conagra's earnings call paints a mildly bearish picture, primarily driven by inflationary pressures and strategic investments impacting margins. Management acknowledges facing challenges, stating that 'the confluence of high inflation and higher investment to drive volume translates to temporary margin compression.' While they saw a 'tremendous consumer response' to volume-focused investments in the first half of fiscal '25, ongoing inflation, estimated at 4% core inflation with animal proteins inflating double digits, necessitates further investment to maintain volume growth, particularly in frozen snacks. This investment, coupled with tariff impacts adding another 3%, leads to a projected operating margin of 11% for the year. Despite the pressure, Conagra is committed to maintaining its dividend while investing in supply chain resiliency, including a chicken plant, and paying down $700 million in debt. They anticipate margin expansion post-fiscal 2026, driven by productivity improvements exceeding 5%, potential inflation relief, supply chain efficiencies, targeted pricing in the canned goods business, and leveraging technology like AI. The company is prioritizing volume growth in its strategic frozen and snacks businesses, even at the expense of near-term profitability, believing that 'healthy volumes are key at this point to long-term value creation.'

CAG's financial performance presents a mixed picture. Revenue has been relatively stable, fluctuating between $2.79B and $3.21B over the last several quarters, with the most recent quarter showing revenue of $2.63B. The gross profit ratio has remained fairly consistent, hovering around 26-28% but dipping to 24.3% in the latest quarter. Operating cash flow has been positive but variable, with the most recent quarter reporting $120.6M. Total debt decreased from $9.07B in Q2 2024 to $8.77B in Q1 2025, then significantly decreased to $1.06B in Q1 2026, indicating a substantial deleveraging. Net income also shows significant variance, ranging from a loss of $567.3M in Q4 2024 to a profit of $466.8M in Q1 2025 and settling at $164.5M in the most recent quarter. Overall, while the company demonstrates an ability to generate positive operating cash flow and has significantly reduced its debt, the inconsistency in net income and gross profit ratio warrants careful monitoring.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.