Conagra Brands, Inc. 2027 Q1 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- Q1 operating margin was 11.5%, and results exceeded management’s expectations, with the beat driven by SG&A timing and a one-time benefit, Ardent Mills, lower-than-forecast inflation, and a tariff refund that was close to a cent.
- Sweet treats, including Snack Pack and Swiss Miss, performed very well in Q1, while management said permissible snacking was below expectations.
- Conagra Brands finished Q1 at 3.99 times leverage.
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Transcript
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Good morning, and welcome to the Conagra Brands Q1 fiscal year 2027 earnings Q&A conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Matthew Neisius, Head of Investor Relations.
Please go ahead. Good morning, everyone, and thank you for joining us.
Once again, I'm joined this morning by John Brase, our CEO, and David Marberger, our CFO. We may be making some forward-looking statements in discussing non-GAAP financial measures during this Q&A session. Please see our earnings release, prepared remarks, presentation materials, and filings with the SEC in the investor relations section of our website for descriptions of our risk factors, GAAP to non-GAAP reconciliations, and information on our comparability items. I'll now ask the operator to introduce the first question.
At this time, we'll begin that question-and-answer session. To ask a question, you may press star and then one. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys. To withdraw your questions, you may press star and two. In the interest of time, we do ask that you please limit yourselves to a single question. At this time, we'll pause momentarily to assemble the roster. Our first question today comes from Andrew Lazar from Barclays. Please go ahead with your question.
Great. Thanks so much. Good morning, everybody.
Morning. Hi there. Maybe want to start out, Conagra's pointing to organic sales in fiscal Q2 to decline 2%, a bit heavier than current consensus.
It looks like quarter to date, maybe scanner looks to be running maybe closer to flattish. I guess I'm just curious if anything's changed in your Q2 top-line outlook and whether it's elasticity or something else that might cause a sequential deceleration, or perhaps it's just more prudent planning.
Thanks so much. Yeah. Good morning, Andrew.
Let me start, and then I'll turn it over to Dave Marberger. I think in general, the pricing we discussed in the Q4 earnings call is really just hitting the market as we speak. I would say in terms of our pricing assumptions, at this point, results are in line with how we plan the year. I like the word you used, Andrew. I think we've taken a very prudent approach to our elasticity assumptions, and these assumptions remained unchanged, which has really frozen at more of a two-to-one elasticity that we've modeled for the year and Grocery & Snacks at more of a one-to-one elasticity. Now, in terms of competitors and followership, I would say we have not assumed any followership in our pricing moves. Obviously, if that happened, there could be some upside to those elasticity assumptions.
We have not modeled that in.
Great. Thanks so much. And just, John, if you're just one additional piece of color.
So we guided to down 2% organic for Q2. This contemplates Thanksgiving timing because you have the second quarter this year versus third quarter. So we may ship a bit below consumption in the second quarter because of the seasonal items may have some more consumption versus shipment. But the 2% is consistent, like John said, with our original planning posture.
Great. Thanks so much. Our next question comes from Peter Galbo from Bank of America.
Please go ahead with your question.
Hey, good morning. Thanks for the question. Dave, just wanted to touch on the updated inflation guidance for the year, having moved kind of to the higher end of the 5%-6%. I know you had kind of Q1 inflation in the 5%-ish range, so more towards the low end, but just kind of how you see it pacing over the balance of the year and maybe just help us think about exit rate. Are we above that 5%-6% as we get to Q4 and kind of how we might think about it again from a phasing perspective?
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