Conagra Brands (CAG) delivered a better-than-feared fiscal Q1, though Q2 is set to be pressured and the full-year hinges on back-half recovery, RBC Capital Markets said in a Thursday note.

The brokerage said Q1 was supported by trade spend timing, improved service levels, and market share gains.

RBC cautioned that near-term numbers will come down as Q2 faces headwinds from the reversal of that benefit, still soft consumption trends, and modestly higher cost inflation.

Conagra now expects total cost inflation to be slightly above 7% for fiscal 2025, mainly due to higher protein costs such as beef, pork, turkey and eggs. Operating margins in the quarter are expected to be modestly below the full-year range of between 11 and 11.5%.

Looking ahead, different areas of the portfolio are expected to play different roles, with frozen and snacks driving volumes while other categories contribute more through pricing.

Management expects a second-half acceleration in growth from easier comparisons, pricing actions partly offset by elasticities, and momentum in frozen and snacks. The brokerage said this recovery path appears achievable but stressed that execution will be key given the consumer environment and pricing pressures.

Following the results, RBC left its organic sales outlook for fiscal 2026 unchanged at about 0.2% and trimmed its EPS estimate to $1.73 from $1.74.

The firm maintained its sector perform rating on the stock with a $22 price target.

Shares of Conagra Brands were down 1.2% in recent trading.

Price: 19.08, Change: -0.23, Percent Change: -1.17