Conagra Brands (Conagra (CAG)) is feeling the squeeze, and it's passing the pain along to shareholders. The packaged food maker reported fourth-quarter fiscal 2026 results that beat adjusted earnings estimates, but the real story is in the outlook: weak guidance, a dividend cut, and a warning that inflation in beef, oil, and logistics isn't going away anytime soon. Shares dropped 5.8% in premarket trading Wednesday to $13.33.

Earnings Beat, Revenue Miss

Adjusted earnings came in at 47 cents per share, topping the Wall Street estimate of 46 cents. Revenue increased 3.6% year over year to $2.882 billion, essentially in line with expectations at just below the consensus estimate of $2.888 billion.

The company reported a GAAP loss of $3.37 per diluted share, compared with earnings of 53 cents a year earlier, reflecting about $2 billion in noncash goodwill and brand impairment charges. Adjusted earnings per share declined from 56 cents.

Organic sales were flat as a 1.6% increase in price and mix offset a 1.6% decline in volume. Reported sales benefited from the 53rd week and favorable foreign exchange but were partly offset by acquisition and divestiture activity.

Margins Weaken As Costs Rise

Conagra posted a net loss of $1.62 billion, while adjusted net income totaled $228 million.

Adjusted operating profit fell 12.5% to $336.5 million, and adjusted EBITDA declined 11% to $484.4 million. Adjusted operating margin narrowed 215 basis points to 11.7%, while adjusted gross margin fell 130 basis points to 24.5% as inflation and unfavorable operating leverage outweighed productivity gains, tariff mitigation efforts and the benefit from the extra week.

Segment Results

Sales in the Grocery & Snacks segment rose 0.3% to $1.15 billion, with organic sales up 0.5%. Adjusted operating profit declined 4.1% to $216 million.

Refrigerated & Frozen sales increased 5.3% to $1.18 billion, although organic sales slipped 0.5%. Adjusted operating profit dropped 18.5% to $139 million.

International sales rose 6.3% to $244 million despite a 2.4% decline in organic sales. Foodservice revenue climbed 8.1% to $302 million, marking a fourth straight quarter of organic growth.

Portfolio Review, Dividend Cut

Management said its focus on driving volume had “sometimes” come at the expense of margins, particularly in frozen foods. The company plans inflation-driven price increases and expects near-term pressure on volumes.

Advertising spending is expected to increase about 14% in fiscal 2027 to roughly 3% of sales, with investment focused on frozen meals and meat snacks.

Chief Executive Officer John Brase said the company is reviewing its portfolio, including strategic options for noncore businesses, as part of a “radical simplicity” initiative.

Operating cash flow declined to $1.4 billion, while free cash flow fell to $979 million. Conagra ended the year with $218 million in cash and $7.27 billion of total debt. Net debt declined 11.9% to $7.05 billion.

The board also cut the quarterly dividend in half to 17.5 cents per share, a move expected to free about $335 million in annual discretionary cash.

Fiscal 2027 Outlook Disappoints

Conagra said it expects inflationary pressures to remain elevated throughout fiscal 2027, driven primarily by higher costs for beef, oil-related inputs and logistics.

The company said these persistent cost increases will require additional inflation-justified pricing actions while it continues to pursue productivity initiatives to help offset the impact on margins.

For fiscal 2027, Conagra forecast adjusted earnings of $1.40 to $1.50 per share, below the analyst consensus estimate of $1.59. The company expects organic sales to decline 1% to 3% and adjusted operating margin to range between 10% and 10.5%.

Management expects volumes to decline by the mid-single digits, with new pricing reaching the market during the middle of the second quarter.

For the first quarter, adjusted operating margin is expected to be in the high-single-digit range due to elevated edible oil, logistics and beef costs, higher advertising spending and about $40 million of tariff-related mitigation expenses. Most benefits from Project Catalyst are expected to materialize in fiscal 2028 and beyond.