Conagra Sounds Inflation Alarm: Transportation Costs Are Rising at Twice the Rate It Expected

Conagra Brands, Inc. (NYSE: CAG ) stock traded lower Wednesday after the packaged-food company beat Wall Street expectations for both earnings and revenue in its fiscal first-quarter 2027 results. 589 billion estimate. 1% to 41 cents per share from 39 cents a year earlier, beating the 28-cent estimate.

1%, while adjusted operating margin declined 33 basis points. 9% to 36 cents per share, while net income increased 6% to $174 million. 3% to $197 million. 8%.

Productivity gains and $4 million in tariff refunds helped results. However, inflation, lower organic sales and unfavorable operating leverage more than offset those benefits. 1% to $61 million. 1 billion.

7% to $218 million. 2% to $273 million. 4% to $31 million. Adjusted operating profit declined in Conagra's other three segments.

8% to $50 million. Conagra attributed the increase mainly to favorable conditions and management of wheat-market volatility at its Ardent Mills joint venture. Cash Flow Weakens As Debt Falls Conagra used $4 million of cash in operating activities, compared with $121 million generated a year earlier. Free cash outflow widened to $128 million from $26 million.

Capital expenditures totaled $124 million. 4 billion, down $193 million from a year earlier. 99 times. 45 estimate.

5%. Conagra expects productivity above 4% and plans inflation-related pricing around the middle of the second quarter. For the second quarter, the company expects organic net sales to decline about 2%. It also sees adjusted operating margin in the high-single-digit range.

Higher logistics and fuel costs, increased advertising spending and the timing of selling, general and administrative expenses are expected to weigh on results. Consumer Pressure, Freight Costs in Focus During Wednesday's conference call, CEO John Brase said the company's pricing actions were being accepted as planned, with "no surprises" compared with expectations. Management continues to model roughly 2-to-1 elasticity for the year, including about 1-to-1 in Grocery & Snacks. The outlook does not assume competitors will follow Conagra's price increases.

Brase also said the consumer is "definitely pressured" and that productivity remains the company's best tool to limit price increases. CFO Dave Marberger reiterated expectations for second-quarter organic sales to decline about 2%. Thanksgiving timing and shipments that may run below consumption are expected to weigh on sales. Conagra said inflation pressures are intensifying, particularly in transportation.

Marberger said transportation inflation is running at roughly twice the rate the company had assumed for the year, more than offsetting some relief in protein costs. As a result, Conagra now expects full-year inflation to land toward the high end of its 5% to 6% range. 84 at the time of publication on Wednesday, according to Pro data. Photo via Shutterstock Read Also: Conagra Gears Up For Q1 Print; Here Are The Recent Forecast Changes From Wall Street's Most Accurate Analysts