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- **Second Half Growth Signal**: Management reaffirms positive organic sales growth in FY2026H2, driven by normalized promotions and supply chain recovery.
- **Margin Expansion Roadmap**: Targets high-20% gross margins via productivity (5%+ annual gains), in-house protein production, and AI-driven process reengineering.
- **Inflation Mitigation**: FY2026 gross inflation tracking to 7% guidance, with favorable chicken costs offsetting protein price pressures.
- **Project Catalyst Payoff**: Early AI-driven efficiency gains expected to accelerate in calendar '26, supporting margin expansion.
- **Chicken Production Shift**: New facility enables in-house capacity for high-margin baked chicken products, reducing reliance on third-party suppliers.
- **No Margin Concession Strategy**: Maintains list prices while investing in promotional volume, avoiding permanent price cuts unlike peers.


**【Q&A Highlights】**
- **Organic Sales Growth Expectation**: CEO Sean Connolly confirmed expectations for positive organic net sales growth in the second half of FY2026, driven by improved promotional activity and supply chain normalization. CFO David Marberger noted Q3 operating margins may be lower than Q2 due to increased A&P spend (~3% of sales) and inventory absorption headwinds.
- **Project Catalyst Progress**: CEO highlighted Project Catalyst, a reengineering of core business processes using AI, as a key margin driver. While implementation details will be shared in calendar '26, early results suggest potential for significant efficiency gains.
- **Inflation Management**: CFO stated gross inflation for FY2026 is tracking near the 7% guidance (core inflation ~4%, tariffs ~3%). Favorable chicken costs offset rising beef/pork expenses, but long-term normalization of protein prices remains uncertain.
- **Gross Margin Trajectory**: CEO emphasized a multi-year plan to claw back to high-20% gross margins through productivity (5%+ annual gains), supply chain investments (e.g., in-house chicken production), and Project Catalyst. Q2 gross margin of ~24% is seen as a stepping stone.
- **Baked Chicken Facility Completion**: New production line is operational, enabling in-house capacity for high-growth baked chicken products. Transition from third-party suppliers is underway, with benefits baked into FY2026 guidance.
- **Impairment Charge Context**: CFO explained the Q2 impairment charge was due to stock price decline and updated discount rate assumptions, not operational underperformance.
- **Competitive Pricing Dynamics**: CEO clarified Conagra's strategy differs from peers - maintaining list prices while investing in promotional volume rather than permanent price cuts. This approach has proven efficient in driving volume without margin dilution.
- **Frozen & Snacks Momentum**: CEO highlighted frozen business recovery (near pre-pandemic market share) and snacks growth (Slim Jim/FATTY momentum). Q3 promotional calendar is stronger than Q2, supporting back-half acceleration.
- **Ardent Mills Impact**: CFO stated $30M Ardent shortfall will be offset by core productivity gains, tariff timing benefits, and chicken cost savings. FY2026 EPS range remains intact despite volatility.


Conagra Brands, Inc. (CAG) Q2 2026 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

Basic EPS from Continuing Operations

Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

CAG

CAG fundamentals

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