Initiated 2026-10-26 · Price $14.71 (as of 2026-10-26 intraday, stockanalysis) · Mkt cap $7.0bn · Consumer staples / packaged foods · Model: verified

Rating: Hold — Conviction: Low

Conagra is a shrinking, 4x-levered branded food company. The new CEO has halved the dividend, guided EBITDA down again and is reinvesting in advertising. At $14.71 the market already prices roughly the guided FY2027 trough: the stock trades at about 10x guided EPS and near the model's Base value. Leverage makes the equity a thin stub, though. If volumes keep falling it loses most of its value, and if margins stabilize it is worth a good deal more. Without evidence that volume losses are ending, the call is Hold, not a value Buy.

Conviction tests (3a-v-c): T1 fail (Hold → Sell at +1pp: Base midpoint −24.6%; +19.8% at −1pp, a Buy reading) · T2 fail (Gordon DCF alone +11.0% reads Hold; exit DCF −22.2% reads Sell) · T3 pass · T4 pass

Model value range vs price
Bear $1.69Base $13.88Bull $24.54Price $14.71

Business overview

Conagra sells branded frozen, refrigerated and shelf-stable food in the US, Canada and Mexico, mostly through grocery and mass retail. FY2026 (53 weeks to 2026-05-31) sales were $11.28bn: Refrigerated & Frozen $4.64bn (Birds Eye, Marie Callender's, Healthy Choice, Banquet), Grocery & Snacks $4.61bn (Slim Jim, Duncan Hines, Reddi-wip, Angie's), Foodservice $1.12bn and International $0.91bn. It also owns 44% of Ardent Mills, a flour miller that contributed $141mm of equity earnings in FY2026. Walmart is ~29% of sales, and the top 10 customers are ~60%. Three variables drive earnings: volume (−2.1% in Q1 FY2027), the gap between COGS inflation and price/mix, and A&P reinvestment. Operating profit fell from $1.59bn in FY2022 to −$1.63bn in FY2026, after $2.95bn of impairments, mostly $2.38bn of Refrigerated & Frozen goodwill.

Competition

Conagra's frozen and shelf-stable categories compete with General Mills, Kraft Heinz, Campbell's, J.M. Smucker and Nestlé (Stouffer's/Lean Cuisine, not US-listed), and above all with store brands. Circana puts private label at about 24% of US food and beverage units. In the six months to 2026-06-14, store-brand units rose 0.2% while national brands fell 0.5% (PLMA/Circana via trade press). Pressure shows up first in volume: Grocery & Snacks volume fell 5.4% in Q1 FY2027 even with +3.4% price/mix. It then reaches price, as Refrigerated & Frozen price/mix fell 1.5%. Circana also projects that GLP-1-using households will account for 35% of food and beverage units by 2030, up from ~23% now, a slow headwind for indulgent frozen and snacks. The peer group trades at 11.0–12.9x forward earnings and 8.2–9.2x EV/EBITDA (stockanalysis). Conagra's 10.3x forward multiple sits below all four peers.

Bull case

  1. Margin restoration — the new CEO's program (productivity, SKU cuts, complexity reduction) recovers about a third of the margin lost since FY2024. Q1 adjusted operating margin of 11.5% already beat the 10.0–10.5% full-year guide. Plays out if COGS inflation eases and the Q1 tariff refunds and productivity gains persist. Model: ebitda_margin
  2. Volume stabilizes — 15% higher A&P and frozen innovation turn organic sales positive by FY2028. Foodservice (+3.3% organic in Q1) and the frozen-vegetable, chili and frozen-breakfast share gains broaden. Plays out if private label gains stay as measured as Circana's +0.2–0.5pt 2026 outlook. Model: rev_growth
  3. Deleveraging re-rates the stub — the dividend cut frees ~$335mm a year. Paying down debt takes net leverage from ~4.0x toward 3x by FY2031 (model Base path 4.2x → 3.1x). The EV multiple then moves toward the peer top (~9x), and more of the EV accrues to equity. Plays out if FCF conversion stays >90% as guided. Model: exit_ev_ebitda

Bear case

  1. Structural volume erosion — private label, GLP-1 adoption and retailer power (Walmart 29%) keep volumes falling 2–3% a year. That is the FY2022–26 pattern, when sales fell from $12.3bn to $11.3bn. Plays out if Q2–Q4 volumes stay at or below Q1's −2.1%. Model: rev_growth
  2. Margin compression continues — COGS inflation (protein, packaging, freight; Brent ~$113) and A&P reinvestment outrun pricing, as in FY2023. Reinvestment buys no volume. This-basis margin has fallen from 20.7% (FY2022) to 16.5% (FY2026) and ~14.8% guided. Plays out if the adjusted operating margin guide is cut. Model: ebitda_margin
  3. Leverage and refinancing — $7.76bn of debt against a 4.5x net-leverage covenant (3.99x now). $1.0bn of 1.375% notes due Nov 2027 and $1.68bn due in FY2029 refinance at ~5.4%+. Small EV declines therefore wipe out large shares of equity value. Plays out if EBITDA falls ~10% before debt is repaid. Model: wacc, exit_ev_ebitda

Valuation & balance sheet

Metric (definition) Current Own history (range or 5y avg) Peers Source, as-of
EV/EBITDA, model basis (no leases; EBITDA incl. Ardent Mills equity earnings) 7.8x FY2026; 8.0x TTM n/a (unverified) lease-inclusive, stockanalysis: GIS 9.2x · KHC 8.3x · CPB 8.2x · SJM 9.2x (CAG 8.7x same basis) EDGAR XBRL; stockanalysis 2026-10-26
P/E forward (stockanalysis consensus) 10.3x (10.1x on guide mid $1.45) n/a (unverified) GIS 11.0x · KHC 12.5x · CPB 12.2x · SJM 12.9x stockanalysis 2026-10-26; Q1 FY2027 8-K
FCF yield (TTM, stockanalysis) 12.4% n/a (unverified) GIS 8.4% · KHC 13.0% · CPB 11.0% · SJM 11.4% stockanalysis 2026-10-26
Dividend yield ($0.175/qtr after the cut) 4.75% was $0.35/qtr through FY2026 GIS 7.2% · KHC 6.5% · CPB 4.8% · SJM 3.4% Q1 FY2027 10-Q; stockanalysis 2026-10-26

Model-implied value range (from model-summary.json; generic module, Gordon-growth DCF and exit-EV/EBITDA DCF, midpoints): Bear $1.69 · Base $13.88 · Bull $24.54 per share, i.e. implied returns of −88.5% / −5.6% / +66.8% vs $14.71. These ranges show how the bull and bear drivers translate into value; they are not price targets. The price sits just above Base, so the market pays for roughly the guided trough plus a little stabilization. The distribution is lopsided because of leverage: debt is 52% of EV. The two methods disagree. Base Gordon is $16.33 and exit is $11.44, and Gordon is 43% higher. At a 6.9% WACC and 1% terminal growth, Gordon capitalizes terminal FCF at roughly 17x. That is a re-rating embedded in the Gordon method, while the 7.5x Base exit is a 3.5% de-rating from today's 7.8x. Tail sensitivity, run because the bear case is a slow decline rather than a break: revenue −6%/−4%/−3.5%/−3%/−3%, EBITDA margin falling to 11.5%, 5.5x exit, 8.4% WACC, −0.5% terminal growth → $0.00 (−100%, floored). Base EPS for FY2027 is $1.35 against the $1.40–1.50 guide (see model note).

Balance sheet: net leverage 3.85x FY2026 EBITDA (model basis; 3.99x on the company's TTM adjusted EBITDA of $1,851mm). The Base path runs from 4.2x in Y1 to 3.1x in Y5. EBITDA/interest is 4.9x. Liquidity is $372mm of cash plus an undrawn $2.0bn revolver to June 2030, with no commercial paper outstanding at 2026-08-30. Covenants are net debt/EBITDA ≤4.5x and EBITDA/interest ≥3.0x. Nearest material maturities: $762.5mm of Oct-2026 notes (matured 2026-10-01; $500mm of 5.4% 2031 notes were issued in July), then $1.0bn of 1.375% notes due Nov 2027 and $1.68bn due Oct/Nov 2028. Ratings: investment grade per the 10-Q; agency letters n/a (unverified).

Model note: built and verified (LibreOffice recalculation matched all 3,207 formula cells). Unverified inputs: none. Assumptions without basis: none. Scenario consistency CHECKs: none. Beta is a judgment: measured 5Y beta is about 0, so the CAPM uses 0.80 (est.), and the base WACC adds a stated +0.5pp leverage premium over the 6.43% CAPM WACC. Base FY2027 EPS of $1.35 is 6.9% below the $1.45 guide midpoint because of definitions. Model EBITDA keeps GAAP restructuring, legal and transition charges (~$30mm in Q1) and excludes pension income (~$25mm guided). FY0 cash and debt are at 2026-08-30, so NWC levels are offset by $224mm of Q1 model-basis FCF.

Relative value vs peers
MetricCAGGISKHCCPBSJMPeer medianvs median
P/E (TTM)n/an/an/a15.8x60.8x38.3x
P/E (forward)10.2x11.0x12.4x12.2x12.9x12.3x−17%
PEGn/an/an/an/a2.0xn/a
EV/EBITDA (TTM)8.7x9.2x8.3x8.2x9.2x8.8x−0%
EV/Sales (TTM)1.3x1.7x1.8x1.4x2.3x1.8x−28%
P/B1.1x2.5x0.8x1.6x2.4x2.0x−45%
FCF yield (TTM)12.4%8.4%13.0%11.0%11.4%11.2%+1.2pp
Dividend yield4.8%7.2%6.5%4.8%3.4%5.6%−0.9pp
P/E (TTM)SJM60.8xCPB15.8x
P/E (forward)SJM12.9xKHC12.4xCPB12.2xGIS11.0xCAG10.2x
PEGSJM2.0x
EV/EBITDA (TTM)GIS9.2xSJM9.2xCAG8.7xKHC8.3xCPB8.2x
EV/Sales (TTM)SJM2.3xKHC1.8xGIS1.7xCPB1.4xCAG1.3x
P/BGIS2.5xSJM2.4xCPB1.6xCAG1.1xKHC0.8x
FCF yield (TTM)KHC13.0%CAG12.4%SJM11.4%CPB11.0%GIS8.4%
Dividend yieldGIS7.2%KHC6.5%CPB4.8%CAG4.8%SJM3.4%

As of 2026-10-26. One source and one definition for every company: TTM multiples, forward P/E on stockanalysis consensus, EV/EBITDA and EV/Sales on stockanalysis EV and TTM EBITDA. Not the model's own EV basis. Quotes are intraday 2026-10-26, 10:00-10:07 ET, with the market open. Dashed line = peer median. Source: stockanalysis.com /stocks/<ticker>/statistics/, fetched 2026-10-26.

Notes. CAG, GIS and KHC show n/a on the source (TTM GAAP losses from goodwill and brand impairments); SJM's 60.8x is depressed by impairments too. stockanalysis shows no PEG for CAG, GIS, KHC or CPB; SJM's 2.05 is the source's figure. Not computed here. CAG's 4.75% reflects the dividend halved to $0.175 per quarter in 2026.

Scenario stress test

Reasoned from the bull/bear drivers above. The model column comes from the scenario overlays (Base case + shock).

Scenario Effect Mechanism Magnitude Model Δ value vs Base ($/sh)
S1 Fast equity crash + Near-zero-beta staple holds up as a defensive; no operating channel over weeks Low +$0.63
S2 Slow bear / recession − Staple demand holds, but shoppers trade down to private label and promotion rises; frozen meals partly substitute for restaurants. Far milder than Base − Bear ($12.19) on purpose: two years, not a permanent volume decline Med −$1.42
S3 Rapid rate shock − Bond-proxy, 4x-levered equity; higher discount rate and refinancing cost on $2.7bn due FY2027–29 High −$4.26
S4 Slow rate grind − Same channel, slower; maturities roll at higher coupons Med −$2.47
S5 Soft-landing cuts + Lower rates re-rate yield-sensitive levered staples; cheaper refinancing High +$3.08
S6 Recession-driven cuts + Rate relief outweighs modest trade-down in a defensive category Med +$1.69
S7a Credit liquidity shock − Low-BBB issuer at ~4x de-rates with credit; no maturity inside the shock window Med −$1.68
S7b Slow default cycle − Wider spreads raise refinancing cost; weaker lower-income consumer Low −$1.09
S8 Stagflation − COGS outruns pricing as in FY2023 while rates stay high Med −$2.39
S9a Dollar spike − International (~8% of sales, Canada/Mexico) translates lower Low −$0.26
S9b Dollar slide + Mirror of S9a Low +$0.26
S10 Melt-up − Rotation out of defensives Low −$1.05
S11 Energy supply shock − Fuel, freight, packaging and crop-input costs; lower-income shoppers squeezed Med −$2.15
S12 Mega-cap/AI derating + Rotation into defensives without recession Low +$1.05

Currently active/on watch per the playbook: S3 partially active; S8, S10 and S11 on watch.

Model value change vs Base, by scenario
S3 Rapid rate shock−$4.26S4 Slow rate grind−$2.47S8 Stagflation−$2.39S11 Energy supply shock−$2.15S7a Credit liquidity shock−$1.68S2 Slow bear / recession−$1.42S7b Slow default cycle−$1.09S10 Melt-up−$1.05S9a Dollar spike−$0.26S9b Dollar slide+$0.26S1 Fast equity crash+$0.63S12 Mega-cap/AI derating+$1.05S6 Recession-driven cuts+$1.69S5 Soft-landing cuts+$3.08

What would change the call

Upgrades if: organic volume turns flat or positive for two consecutive quarters while adjusted operating margin holds ≥10.5%, or net leverage falls below 3.5x with the guide intact. Downgrades if: the FY2027 guide is cut (organic below −3% or adjusted operating margin below 10%), net leverage rises above 4.2x, toward the 4.5x covenant, or there is another Refrigerated & Frozen goodwill impairment (its $4.7bn of goodwill had ≤10% headroom at FY2026).

Watch items

Sources