Conagra Brands (CAG) faces challenges within packaged food and inflation-driven earnings pressure heading into fiscal year 2026, Bank of America Securities said in a Thursday research report.
BofA said its cost-of-goods-sold basket analysis for the next year suggests that protein-segment inflation is likely to pose a significant headwind to the company's earnings growth, with COGS inflation nearing 6% in fiscal 2026, resulting in up to 150 bps of year-over-year gross margin pressure.
The company's pricing power in the single-serve frozen meals appears limited as demand elasticity for the category is at the higher end of BofA's packaged food coverage with historical -1 elasticity, according to the analysts.
The recent sale of Chef Boyardee could be a positive for Conagra in the long term but its "relative attractiveness from a margin/cash flow perspective is tough to forgo," analysts wrote.
BofA modeled fiscal 2026 adjusted EPS at $2.00, down from $2.37 earlier on lower organic sales growth estimates of 0.3%. The brokerage also trimmed its fiscal Q4 adjusted EPS estimates to $0.57 from $0.61 on a sales drop of 2.4% from forecasts of 0.2% earlier.
BofA downgraded Conagra to underperform from neutral and lowered its price target to $20 per share from $27.
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