Conagra Brands (CAG): Earnings Struggles and Sector Headwinds Signal a Sell

The food industry is grappling with relentless headwinds, and Conagra Brands (CAG) finds itself at the epicenter of the storm. Recent earnings estimate revisions and a deteriorating outlook paint a stark picture for investors, particularly when compared to peers like Mondelez (MDLZ). While both companies face sector-wide challenges, CAG's inability to navigate cost pressures and weak demand has pushed its Zacks Rank to a rare #5 (Strong Sell)—a stark warning for shareholders.

CAG's Earnings Misses and Declining Estimates

Conagra's Q4 fiscal 2025 results underscore its struggles. The company reported EPS of $0.56, missing estimates by 5.08%, while revenue fell to $2.78 billion, a 2.18% miss versus expectations. Over the past four quarters, CAG has only beaten EPS estimates once and matched revenue expectations once.

Looking ahead, analysts have slashed fiscal 2025 EPS estimates to $2.33, a 12.7% decline year-over-year, with revenue projected to drop 3% to $11.7 billion. Even these pessimistic forecasts face risks: Zacks estimates for Q4 EPS were cut by 2.01% over the last 30 days, and the company's Earnings ESP (a measure of beat/miss likelihood) is negative at -1.37%. Management now forecasts a 2% organic sales decline for fiscal 2025, with margins squeezed by elevated protein costs, rising SG&A expenses, and a sluggish recovery in the Foodservice segment.

Mondelez: A Better-Positioned Peer, But Not Immune to Pain

Mondelez (MDLZ) offers a useful contrast. While its Q2 2025 EPS is expected to drop 22.1% to $0.67, revenue growth of 6.1% to $8.85 billion reflects the strength of its global brands like Oreo and Cadbury. MDLZ's Earnings ESP of +4.04% and Zacks Rank #3 suggest it's better positioned to meet estimates than CAG.

However, the broader Food - Miscellaneous industry—where both companies compete—remains in the bottom 27% of Zacks-ranked sectors, historically underperforming the market. This sector-wide stagnation complicates recovery prospects for even the strongest players.

Why the Sell Recommendation Holds

CAG's issues are both structural and cyclical:
1. Cost Inflation: Persistent pressure on input and protein costs has eroded margins, with no near-term relief in sight.
2. Weak Demand: The Foodservice segment, critical to CAG's portfolio, remains hamstrung by slow post-pandemic recovery and macroeconomic uncertainty.
3. Sector Drag: The industry's low Zacks rank implies that even if CAG improves, broader underperformance could cap gains.

In contrast, MDLZ's top-line growth and global diversification provide a buffer, but its own earnings decline highlights the sector's limits. For CAG, the combination of deteriorating estimates, poor revenue trends, and a Zacks Rank #5—reserved for the worst-ranked stocks—makes a sell recommendation compelling.

Investment Takeaway

Investors should exit CAG exposure before the Q4 earnings report on July 10, 2025. While MDLZ offers a marginally better outlook, the sector's struggles suggest caution across the board. Monitor post-earnings guidance for signs of cost discipline or demand stabilization, but for now, the risks here outweigh any potential rewards.

In a challenging food industry landscape, CAG's inability to adapt to rising costs and shifting consumer trends makes it a prime candidate for a sell. The data is clear: this ship is not worth riding in turbulent waters.