Conagra Brands Q3 2025 Earnings Report

Conagra Brands EPS Results

• Actual EPS: $0.51
• Consensus EPS: $0.52
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: $0.69

Conagra Brands Revenue Results

• Actual Revenue: $2.84 billion
• Expected Revenue: $2.92 billion
• Beat/Miss: Missed by -$82.85 million
• YoY Revenue Growth: -6.30%

Conagra Brands Announcement Details

• Quarter: Q3 2025
• Date: 4/3/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, April 3, 2025
• Conference Call Time: 9:30AM ET

Conagra Brands (NYSE:CAG), together with its subsidiaries, operates as a consumer packaged goods food company primarily in the United States. The company operates through Grocery & Snacks, Refrigerated & Frozen, International, and Foodservice segments. The Grocery & Snacks segment primarily offers shelf stable food products through various retail channels. The Refrigerated & Frozen segment provides temperature-controlled food products through various retail channels. The International segment offers food products in various temperature states through retail and foodservice channels outside of the United States. The Foodservice segment offers branded and customized food products, including meals, entrees, sauces, and various custom-manufactured culinary products packaged for restaurants and other foodservice establishments. The company sells its products under the Birds Eye, Marie Callender's, Duncan Hines, Healthy Choice, Slim Jim, Reddi-wip, Angie's, BOOMCHICKAPOP, Duke's, Earth Balance, Gardein, and Frontera brands. The company was incorporated in 1919 and is headquartered in Chicago, Illinois.

Conagra Brands Q3 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, and welcome to the Conagra Brands Third Quarter Fiscal twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr.

[Operator]

Matthew Nysas, Senior Director of Investor Relations for ConAgra Brands. Please go ahead.

[Matthew Neisius, Sr. Director, Head of Investor Relations at Conagra Brands]

Good morning, everyone, and thank you for joining us today. Once again, I'm joined this morning by Sean Connolly, our CEO and Dave Marburger, our CFO. We may making some forward looking statements and discussing non GAAP financial measures during this session. Please see our earnings release, prepared remarks, presentation materials and filings with the SEC, which can be found in the Investor Relations section of our website for more information, including descriptions of our risk factors, GAAP to non GAAP reconciliations and information on our comparability items. I'll now ask the operator to introduce the first question.

[Operator]

The first question will come from Andrew Lazar with Barclays. Please go ahead.

[Andrew Lazar, Managing Director at Barclays]

Great. Thanks so much. Appreciate it. I guess, Sean, I realize there's still one quarter to go in the fiscal year. Macro dynamics make for obviously a super challenging environment in which to forecast.

[Andrew Lazar, Managing Director at Barclays]

I think but at CAGNY you mentioned a few items as it related to fiscal twenty twenty six including the higher brand spending already being in the base for next year, 4% of cost of goods is productivity and a fifty third week with the wildcard I think being where inflation lands. So I was hoping I guess you could at least bring us through your thoughts even at high if high level on how we think about next year at this stage knowing much is still subject to change? I guess I asked this in the context of some other sort of fiscal year reporters having already indicated not to expect much growth next fiscal year due to the need for greater reinvestment. Yet in Conagra's case, as you pointed out in the prepared remarks, consumption trends have been steadily improving. Thanks a lot.

[Sean Connolly, President and CEO at Conagra Brands]

Okay. Good morning, Andrew. Let me try my best to answer that. As you know, we don't provide fiscal year guidance for any forthcoming year until the Q4 call that precedes it. So that won't officially happen to July.

[Sean Connolly, President and CEO at Conagra Brands]

And given the macro environment you cited this year is extraordinarily dynamic. So we will definitely take advantage of the time between now and then to see where the dust settles on a number of these external things we are monitoring. That said, you are already equipped with some of the puts and takes. Number one, consumer pull for our products remains strong and a lot of the spend, as you pointed out, is in the base. Number two, inventories are being rebuilt, but some of the higher costs associated with recent supply chain constraints will linger into Q1.

[Sean Connolly, President and CEO at Conagra Brands]

Three, we don't expect a Hebrew National repeat in Q1. And four, we don't expect this year's second half supply constraints to repeat in H2 next year. But and this is the big but five, we are still monitoring inflation, tariffs, consumer sentiment and the need for pricing. So overall, too early to give you an outlook at this juncture.

[Andrew Lazar, Managing Director at Barclays]

Okay. Yes, understood. And then, really just second, if you could go into a little more detail on the differential or the gap between shipments and consumption in the grocery space, just because that was the area where there was the biggest differential and frankly came in below what I think many had modeled versus obviously refrigerated and frozen? Thanks so much.

[Sean Connolly, President and CEO at Conagra Brands]

Yes, let me hit on that. The prepared remarks were really focused on the gap between shipments and consumption that's tied to the supply constraints, which is really a frozen concept. What you're seeing in the grocery and snacks concept is a bit different, which is in grocery and snacks this year, more seasonal holiday what I'll call seasonalholiday shipments fell into Q2 versus last year where more fell into Q3 because holidays were later this year. But overall, if you look at the six month pattern in Grocery and Snacks, it's pretty normal. There's nothing out of the ordinary there.

[Sean Connolly, President and CEO at Conagra Brands]

So overall, the quarter came out for us very consistent with what we laid out for folks when we spoke about it in CAGNY, and that includes grocery and snacks where there's just some shipment timing where some of the holidayseasonal shipments were a little bit different quarter by quarter this year versus last year. But overall consumption at the company level remains strong and that's what we've been focused on. So that's really what you're seeing there.

[Andrew Lazar, Managing Director at Barclays]

Got it. Thank you.

[Operator]

The next question will come from Ken Goldman with JPMorgan. Please go ahead.

[Ken Goldman, Managing Director at J.P. Morgan]

Just on the subject of Grocery and Snacks, I appreciate that certain elements of that business including meat snacks are sold maybe

[Ken Goldman, Managing Director at J.P. Morgan]

a little

[Ken Goldman, Managing Director at J.P. Morgan]

more heavily in convenience stores than traditional packaged food. I'm just wondering some of the data that we're getting on C stores is not ideal right now. I'm just curious if that had any kind of impact versus your prior expectations on any of your products and maybe the overall grocery and snack segment this quarter?

[Sean Connolly, President and CEO at Conagra Brands]

Yes. Good question, Ken. Let me try to demystify that for you a little bit. First of all, overall, Q3 unfolded in a manner that was very consistent with what we updated everybody on when we were at CAGNY and that includes Grocery and Snacks. The thing you're noticing in Grocery and Snacks, as Andrew just pointed out, is that that gap between shipments and consumption.

[Sean Connolly, President and CEO at Conagra Brands]

Consumption overall at the company level and at G and S in general remained pretty strong. But there was a gap and it was really the way shipments fell last year versus this year and it's last year more was in Q3, this year more was in Q2. So that's it. In terms of consumption overall for our company, as you saw in the prepared remarks, consumption remains incredibly strong, which is really terrific to see. Now if you ask me to dig within the strong overall consumption, where are their spots that are weaker, certainly on a channel perspective, C store as a channel can have its challenges when the consumer gets stretched.

[Sean Connolly, President and CEO at Conagra Brands]

And we have not been immune to that this year nor have our competitors. And so there is some channel shifting going on. C store relative to its normal performance is a bit weaker. That's certainly impacting our portfolio. But as you can see in the total scanner data, we tend to make that up in other channels.

[Sean Connolly, President and CEO at Conagra Brands]

So our total consumption remains incredibly strong. The only other thing I'll point you to is that within parts of the dollar channel and not every competitor or every retailer within the dollar channel is performing equally, there are some spots that are, I'll just say, that are weaker than others that so we've had some of that in actually, it's some non measured that shows up in shipments, but not material at all on an overall consumption basis for the company, which you saw was strong.

[Ken Goldman, Managing Director at J.P. Morgan]

Great. I'll pass it on. Thanks,

[Operator]

next question will come from Lee Jordan with Goldman Sachs. Please go ahead.

[Leah Jordan, Analyst at Goldman Sachs]

Good morning. Thank you for taking my question. I know it's a little early still for 2026 guidance as you pointed out, but I just wanted to see if you could comment on your confidence in hitting your leverage target of three times by the end of next year. I guess what are the key risks you see at this point? And how do you think about the contributions from debt paydown versus just an acceleration in the business?

[David Marberger, Executive VP & CFO at Conagra Brands]

Leigh, this is Dave. Yes. So as you saw in Q3, we're really pleased with our cash flow performance. Our free cash flow conversion is 125%. We paid down $05,000,000,000 of debt in the last twelve months.

[David Marberger, Executive VP & CFO at Conagra Brands]

So we expect the cash flow to continue to be strong and continue to pay down debt. We will update kind of where we are with the three times leverage target by the end of next year when we give guidance for July. Obviously, that's impacted by earnings in the denominator. But so we'll see where we are there. But the cash flow is strong.

[David Marberger, Executive VP & CFO at Conagra Brands]

We expect it to continue to be strong. And our priority with that cash flow is to pay down debt. So that will continue, and then we'll see where we are with that leverage target when we give guidance in July for fiscal twenty twenty six.

[Leah Jordan, Analyst at Goldman Sachs]

Great. Thank you. That's helpful. And then just as we're kind of talking about cash flow, it looks like you lowered your CapEx guidance for this year by about $40,000,000 Just seeing if you could provide more detail on what was removed or delayed from the budget? And really does this mean that we should anticipate a higher than normal CapEx next year?

[Leah Jordan, Analyst at Goldman Sachs]

And then just maybe while we're on the topic and given we've had these recent plant issues, just maybe have you changed how you think about maintenance CapEx at all? Thank you.

[David Marberger, Executive VP & CFO at Conagra Brands]

Yes. So yes, the update in capital for this year is all timing. So just in terms of the cash impact of capital, more of that is shifting into next fiscal year. So we'll give a specific guidance number on CapEx next year, but you could expect that, that will bounce back up to kind of levels where we started this year. And that's not unusual with projects that you have, timing can slip.

[David Marberger, Executive VP & CFO at Conagra Brands]

And so that's just simply timing. It's not a result of us kind of cutting anything or doing anything. In terms of maintenance capital, we have a very robust process for allocating maintenance capital and making sure that all of our operations have capital they need to keep the operations running and be efficient. In situations that we've had with our chicken operation, when we find things, we prioritize fixing the root issues. And in this case, we're going through a full modernization of that plant, and we are estimating that we will be done that by August.

[David Marberger, Executive VP & CFO at Conagra Brands]

So we always prioritize maintenance capital, and that's no different than the way we've always handled it.

[Sean Connolly, President and CEO at Conagra Brands]

Yes. Just to add a little more color on the maintenance capital piece. We are in the midst of a multiyear effort to kind of modernize our supply chain. Alain Ebeli, our Chief Supply Chain Officer, laid that program out at CAGNY a little over a year ago. And we've made tremendous investments in maintenance capital to modernize our facility, including planned major capital investments in the frozen facility that makes our work in process chicken.

[Sean Connolly, President and CEO at Conagra Brands]

As I pointed out at CAGNY, we didn't quite get all the way to get implementing that project because we ran into some quality and consistency issues before we got started. So we've had to deal with that a little bit earlier than we expected. It's coming at a cost. It obviously disrupted our service. But I just want to emphasize that the investment plans have been in flight on the modernization of our network for multiple years now and remain robust.

[Leah Jordan, Analyst at Goldman Sachs]

Great. Thank you.

[Operator]

The next question will come from Tom Palmer with Citi. Please go ahead.

[Thomas Palmer, Vice President, Senior Equity Research Analyst at Citi]

Good morning and thanks for the question. I guess just to start off, I wanted to ask on the fourth quarter. You noted the persistence of higher inflation, which seems to maybe be a little bit incremental to 4Q. It sounds like tariffs, at least the wave you were able to comment on, aren't a big swing item, but they probably don't help. And then at least relative to consensus estimates, sales came in a bit light.

[Thomas Palmer, Vice President, Senior Equity Research Analyst at Citi]

But you also reiterated your annual outlook. So are there incremental maybe tailwinds to be thinking about when we look towards 4Q that drive that inflection? Thank you.

[Sean Connolly, President and CEO at Conagra Brands]

Yes.

[Sean Connolly, President and CEO at Conagra Brands]

I'll make one comment and flip it to Dave. As I mentioned earlier to Andrew and Ken, Q3 unfolded in a manner largely consistent with what we expected when we spoke to investors at CAGNY. And given that, there's obviously not a lot of contemplation to changing kind of what we anticipate in Q4. But I think the big thing that we have to do, and I understand everybody on this call today is really eager to get some perspective on how is next year going

[Sean Connolly, President and CEO at Conagra Brands]

to unfold. We got to

[Sean Connolly, President and CEO at Conagra Brands]

see where the dust settles on these external factors because that is the biggest variable we are dealing with right now. We've already been dealing with inflation that really has not abated. So we've had record inflation over the last few years. We've still been in higher inflation this year than we expected when we went into the year. And now we're looking at potential factors that could exacerbate that and what are the follow on actions that we're going to have to take.

[Sean Connolly, President and CEO at Conagra Brands]

It's too early to tell, obviously, how the dust is going to settle there, but that's going to be a factor for us. And things are moving around quite a bit. There are things like vegetables that we import from Mexico that we at one point we thought maybe that would be an issue. Well, maybe there's an exemption there, but then maybe there are other things that become an issue. So things are moving around not only on a weekly or daily basis, but on an hourly basis right now.

[Sean Connolly, President and CEO at Conagra Brands]

We've got to see where all the dust settles on that so we can really pin down next year to the best of our abilities and give you the guidance that is going to be as helpful as you as we can give.

[Sean Connolly, President and CEO at Conagra Brands]

Dave, anything you want

[Sean Connolly, President and CEO at Conagra Brands]

to add to Yes.

[David Marberger, Executive VP & CFO at Conagra Brands]

Tom, real quick, just the building blocks for our Q4. We expect consumption to continue to be strong and through Q4. We expect our shipment volumes to improve versus Q3 as we improve our service levels. We are improving our service levels on Birds Eye and our frozen meals with chicken. Expect improvement in gross margins in Q4 versus Q3 because remember, in Q3, we were negatively impacted by the supply disruptions and the disruption to our operations.

[David Marberger, Executive VP & CFO at Conagra Brands]

So absorption in this quarter negative absorption was very high. And then just some of the onetime costs we had because when you shut down an operation, it does hit your costs. So we do expect improvement in Q4 versus Q3. And then you saw that we had a trade estimate true up in Q3. So we don't expect trade to have as much of an impact on margin in Q4 versus Q3.

[David Marberger, Executive VP & CFO at Conagra Brands]

And our SG and A will be favorable in Q4 versus the prior year. So they're really the key building blocks.

[Thomas Palmer, Vice President, Senior Equity Research Analyst at Citi]

Okay. Thank you for that. Just on the, I guess, import question with tariffs, you noted the veggies from Mexico. Are there other major items we should be thinking about that you traditionally import? And then beyond just, I guess, raw materials, are there finished goods sold in The U.

[Thomas Palmer, Vice President, Senior Equity Research Analyst at Citi]

S. That are sourced overseas? Thank you.

[Sean Connolly, President and CEO at Conagra Brands]

Yes. I'll just give you a little commentary on that. We buy, obviously, a lot of stuff that goes into our product. Much of it is sourced in The U. S, but when we cannot find a supply in The U.

[Sean Connolly, President and CEO at Conagra Brands]

S, think Chipotle and avocados, things like that, we will source it elsewhere. So I mentioned vegetables out of Mexico. We buy a lot of tinplate steel for our cans outside The U. S. Because something like 75% of the tinplate steel lines in The U.

[Sean Connolly, President and CEO at Conagra Brands]

S. Have been eliminated since 2018, leaving manufacturers in a position where they have no choice but to source these things overseas. We kind of fall into that camp. But things are moving. So yesterday, I might have thought there could be an issue with vegetables coming in from Mexico and maybe that's not going to be an issue, we'll see.

[Sean Connolly, President and CEO at Conagra Brands]

But today maybe there is an issue on things like palm oil that wasn't on the radar as squarely yesterday. So things are moving around. I'm not going to give you a definitive list right now because of the volatility of the situation. But as you know, running a business, have to be able to have some stability in your assumptions. And right now, the assumptions that we're making are moving around a bit.

[Sean Connolly, President and CEO at Conagra Brands]

We're tracking them by the minute. And as soon as we've kind of see the dust settle, we'll rack it all up, give you our outlook and that will be when we're in a position to give you the best guide for the coming year. Anything you'd add to that, Dave?

[David Marberger, Executive VP & CFO at Conagra Brands]

Yes. No. And our manufacturing, what we sell in The U. S. Is really manufactured in The U.

[David Marberger, Executive VP & CFO at Conagra Brands]

S. So as Sean said, what we're looking at is our materials and materials that we would have to bring in from outside of The U. S. Just because they're not available in The U. S.

[David Marberger, Executive VP & CFO at Conagra Brands]

Great. Thanks guys. I know it's a very evolving situation. So appreciate the color.

[Operator]

The next question will come from Chris Correa with Wells Fargo. Please go ahead.

[Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo]

Hey, guys. Quick follow-up on Q4 and then a little bit of a follow-up on the broader macro backdrop. Just in Q4, you'd said that the shipments would come at a higher cost, but you also expect gross margins to improve the quarter in Q4 relative to Q3. What's kind of the gap there? It's better productivity, the incremental pricing on protein.

[Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo]

Can you maybe just help a little bit more context there?

[David Marberger, Executive VP & CFO at Conagra Brands]

Yes, Chris. As I mentioned, we have pretty negative absorption, which has impacted our cost in Q3, which will get better in Q4. But also the incremental costs we're incurring with third party co mans to get our inventories back, we've actually started incurring in Q3. So that will continue in Q4, but it's consistent. So it's not incremental to Q3.

[David Marberger, Executive VP & CFO at Conagra Brands]

And that will continue through Q1 of fiscal twenty twenty six, the using the third party co man.

[Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo]

Okay. And then this is a slightly unfair question, but just following up on the prior line of thinking. When you think about the uncertainty in the current environment going into fiscal twenty twenty six, how much of

[Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo]

that is

[Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo]

associated with the top line, the consumer response to this environment relative to your cost structure? I don't know if there's a way to kind of parse that out, but clearly there's a consumption angle to this and there's also the kind of tariff and cost angle. And I wonder if there's any way to frame the relative impact of either at this point?

[Sean Connolly, President and CEO at Conagra Brands]

Well, I won't comment on next year, Chris, but let me just let me give some perspective on this year and kind of what our stance has been for the last year. Obviously, management teams are always trying to simultaneously drive acceleration of growth and gross margin expansion. So we in normal times, we want them both and we want them both right now. About a little over a year ago, we said, look, they may not come in at the same time. So if you've got to prioritize getting volume back to growth versus continued gross margin expansion, how do you prioritize?

[Sean Connolly, President and CEO at Conagra Brands]

And we said, we're going to plant the flag and say returning volume to growth is the most important thing for the long term value creation of the company. We have to keep the relationship between the consumer and our brands. And we made the investment to do that and we've seen very strong connectivity between the consumer and our brands. Obviously, that has pressured gross margins for us and for the industry. And so now as we start to think about what's coming next year, I think we're in for another year where we've got we're going to have our hands full in terms of continuing to drive growth and continuing to drive margin expansion.

[Sean Connolly, President and CEO at Conagra Brands]

And that's what we're going to do between now and July when we guide and say what's the strongest plan we can put together on both metrics.

[Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo]

Okay. All right. Thanks a lot.

[Operator]

Your next question will come from Yasmeen Deswande with Bank of America. Please go ahead.

[Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch]

Good morning, everyone. Thanks for the question. Dave, I just have a question for you and just specifically on cost inflation. In your prepared remarks, you mentioned taking pricing in Hebrew National to offset protein inflation. And I believe there was a comment made previously on the expectation of deflation on crop based inputs.

[Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch]

So I guess at this point, is the expectation for fiscal twenty twenty six to be higher than fiscal twenty twenty five year to date? Do you just have any updated thoughts there? Thanks.

[David Marberger, Executive VP & CFO at Conagra Brands]

Yes. We're not as we mentioned, we're not going to give any insight on fiscal twenty twenty six until our July call. There's a lot of things moving around right now, candidly. You saw for the quarter, our inflation came in around 4%, which is where we expected it to be, and we had guided for that for the full year. So right now, we're just looking, as Sean said, looking at all the dynamics and kind of the impact that it may have, and then we'll update further in July.

[David Marberger, Executive VP & CFO at Conagra Brands]

But I'm not going to comment anymore on inflation for next year.

[Sean Connolly, President and CEO at Conagra Brands]

Yes. I think the big thing to take away is that it's still 4%. We've had record inflation over the last few years and there were some folks that thought things would go backwards. That has not happened. In this quarter, we're still looking at 4%.

[Sean Connolly, President and CEO at Conagra Brands]

And some of the external things that we're talking about are incremental above and beyond that if the baseline doesn't move. So that's what we've got to see shake out. And obviously, if we have to deal with some of these external factors, we're going to have a number of levers available to us that we typically push on. We'll look at our productivity programs and can we squeeze more out of that. We'll look at alternative suppliers.

[Sean Connolly, President and CEO at Conagra Brands]

Can we get a better price elsewhere and we'll look at pricing. Everything is on the table.

[Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch]

Okay, great. Thank you. And I just have a quick follow-up and it's more of a clarifying question off of Andrew's question earlier. So the gap in grocery and snacks, some of that is unfavorable mix, some of that is trade spend. So is the remaining of that mix, is it just Swiss Miss?

[Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch]

What are the other products was that that kind of drove that delta? Delta?

[Sean Connolly, President and CEO at Conagra Brands]

I think you just hit on pretty much all of it. I mean the gap between shipments and consumption in grocery and snacks, already hit that pretty hard. That was really just the way shipments fell last year, of them in Q3 than this year, more of them in Q2. That's really it. You understand the trade adjustment.

[Sean Connolly, President and CEO at Conagra Brands]

Anything else, Dave?

[David Marberger, Executive VP & CFO at Conagra Brands]

Yes. No. And we talked about like Swiss Miss, the consumption was really strong in Q3. So when you look at consumption versus shipments, that's just the seasonality of that business, right? You ship it and then the consumption and it really it depends on the weather and when people want to buy it.

[David Marberger, Executive VP & CFO at Conagra Brands]

And so Yes.

[Sean Connolly, President and CEO at Conagra Brands]

Those shipments went in Q2. We and retailers thought more consumption would have occurred in Q2. The weather didn't cooperate, but it did come in Q3. So I always say winter always comes. It came in Q3, it just pushed more of the gap.

[Sean Connolly, President and CEO at Conagra Brands]

It's one of the contributing factors between the gap between shipments and consumption as it fell in the third quarter.

[Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch]

Thanks guys.

[Sean Connolly, President and CEO at Conagra Brands]

Thanks.

[Operator]

The next question will come from Alexia Howard with Bernstein. Please go ahead.

[Alexia Howard, Analyst at Bernstein]

Good morning, everyone.

[Sean Connolly, President and CEO at Conagra Brands]

Hi, Alexia.

[David Marberger, Executive VP & CFO at Conagra Brands]

Good morning.

[Alexia Howard, Analyst at Bernstein]

So a couple of quick questions. First of all, can you comment on any recent changes in the state of the consumer and behaviors that are shifting? We've been hearing from others that things might have deteriorated in the last eight weeks or so. I know you mentioned C stores. Yes, any comments about shifts?

[Sean Connolly, President and CEO at Conagra Brands]

Alexia, we've been talking about these behavior shifts for about two years now where you've got stretched household balance sheets, you've had value seeking behavior, people seeking trade offs. So that's been in place and it's been everything from the beginning around things like more use of leftovers, things like that. So that has been with us. We invested to kind of overcome some of those challenges and obviously you've seen tremendous responsiveness and especially in our frozen business since we started making those investments. But I think it's really more of just a continuation of a challenged consumer balance sheet where they are stretched.

[Sean Connolly, President and CEO at Conagra Brands]

And so we've been incentivizing them with good innovation and some low discount, high quality promotions to drive consumption and you can see it in our numbers. But they're being very discerning. I anticipate that's going to continue. If we see prices in food or elsewhere go up further, I think you're going to see more trade down behaviors. And I think it will be the typical stuff.

[Sean Connolly, President and CEO at Conagra Brands]

Think the first thing you'll see is discretionary purchases will weaken, food service trends will weaken. And then within at home eating, think you'll see a lot of that value seeking behavior. So we're very well positioned to compete in that environment as we pointed out at CAGNY. Frozen foods are doing quite well right now. And obviously, we're the world's biggest frozen company.

[Sean Connolly, President and CEO at Conagra Brands]

And then within snacking, importantly, we're very protein centric and healthy permissible snacking. And so we've got one of the stronger snack portfolios right now, and that's helping us navigate some of these challenging consumer times as well.

[Alexia Howard, Analyst at Bernstein]

Thank you. And as a follow-up, I know you've got a lot on your plate right now with everything going on, but there seems to be a lot of activity at the state level to introduce bans or labeling requirements on certain additives. That seems to be bubbling up in a lot of different states now. Is that going to be a major burden headache for you? Or is it going to be fairly straightforward to accommodate all of that?

[Sean Connolly, President and CEO at Conagra Brands]

Well, Alexia, you are now hitting on why when I talk about the things we're monitoring externally, it's plural. It's not one thing, it's not tariffs, it's a variety of things. So added to the list of external factors monitoring. The good news for the ConAgra portfolio in regard of that one in particular is, as I pointed out at CAGNY, some number materially over 90% of our portfolio doesn't have any synthetic dyes or food coloring in our products. So it's really not a big deal for us.

[Sean Connolly, President and CEO at Conagra Brands]

But we do have to monitor it because state by state legislation is very difficult for manufacturers to deal with. We'd rather have a federal singular voice on this, so we can adapt and be as agile as we can. But when you're dealing with state level legislation, it makes it more challenging for manufacturers to have to try to tailor stuff to individual states. So but with respect to food dyes and colors in general, that's not a we don't have a lot of in our portfolio. It's not a material concern.

[Alexia Howard, Analyst at Bernstein]

Thank you very much. I'll pass it on.

[Operator]

Your next question will come from Megan Klap with Morgan Stanley. Please go ahead.

[Megan Clapp, Executive Director at Morgan Stanley]

Hi, good morning. Thanks so much. Maybe just a quick follow-up on 4Q. I think the guide maybe implies org sales somewhere around flattish. It looks like consumption, which makes sense just given the supply chain challenges, has trended a bit lower in the most recent period.

[Megan Clapp, Executive Director at Morgan Stanley]

So as you talked about volumes improving, you're going to get a shipment benefit from the restock of retail inventory. But maybe can you just help us unpack the underlying expectation as it relates to consumptions in the context of flattish shipments in the fourth quarter? That would be helpful. Thank you.

[Sean Connolly, President and CEO at Conagra Brands]

Well, I just I think the way to think about the shape of consumption is when you have supply constraints is as long as the underlying consumer pull remains strong, consumption will remain strong until your inventory position weakens. And so obviously, because we've had limited inventory, the inventory position has begun to weaken that will lead to out of stocks on the shelf and that will start to show up as weakness in consumption. But unlike what you're seeing from some companies on the consumption line right now, I think investors don't need to have a lot of anxiety if you see that weakness in our consumption because it will not be connected to weakened consumer pull. It will be weakened it will really be about weakened supply and inventory levels. That too will pass because we have invested now to rebuild those inventories, but that will be the shape of the curve is consumption will be strong until our inventory position weakens, then it will weaken for a little bit and then it will rebound.

[Sean Connolly, President and CEO at Conagra Brands]

You already hit the shipment flow and how that works.

[David Marberger, Executive VP & CFO at Conagra Brands]

Yes. And there is a Q4 impact because of the timing of the Easter holiday. So you're seeing some negative consumption now because Easter was earlier last year than this year. So, yes, so we expect continued strength in consumption for Q4 like we've seen.

[Megan Clapp, Executive Director at Morgan Stanley]

Got it. That's helpful. Thanks. And maybe just a couple of housekeeping items. I don't think I saw an updated guide for leverage for this year.

[Megan Clapp, Executive Director at Morgan Stanley]

Is it still I think 3.55 is what you told us at CAGNY? Or is it maybe a bit better given the lower CapEx guide? And then the second would just be on equity method earnings. I think they were a bit better in the quarter at least versus what consensus was modeling. Is that just timing?

[Megan Clapp, Executive Director at Morgan Stanley]

Is 150,000,000 kind of still the right number for the year?

[David Marberger, Executive VP & CFO at Conagra Brands]

Yes. We've held both of those for the year. We haven't changed.

[Megan Clapp, Executive Director at Morgan Stanley]

Okay. Thank you.

[David Marberger, Executive VP & CFO at Conagra Brands]

Yes.

[Operator]

Your next question will come from Max Gunport with BNP Paribas. Please go ahead.

[Max Gumport, Director - Equity Research at BNP Paribas]

Hey, thanks for the question. Your snack volumes were up 4% in 3Q, which stands in contrast to what we're seeing for the industry. Really, we're seeing snacking categories under pressure. And I realize your total snack performance was helped by weather as it relates to the Swiss Miss business, but it still looks like your volume growth came from several of your key brands. So I was hoping you could provide a bit more color on what you're seeing in snacking with regard to the broader industry weakness?

[Max Gumport, Director - Equity Research at BNP Paribas]

And then what you think is helping your business Thanks very much.

[Sean Connolly, President and CEO at Conagra Brands]

Sure. And for those who are tuning into this call who did not tune into CAGNY, I would direct you to Bob Nolan's presentation on the future of frozen and the future snacking because it was chock full of interesting insights on both of those businesses. With respect to snacking, it's a fascinating time because snacking is an enormous, I don't know, 80,000,000,000 plus industry in The U. S. And historically, a lot of that volume in snacking is traditional chips.

[Sean Connolly, President and CEO at Conagra Brands]

But there is a movement afoot in snacking right now toward healthier snacking away from carbs and more toward protein protein dense snacking. That's effectively our business. Our business is highly concentrated in protein and fiber. So between meat snacks and popcorn, you've got two very on trend businesses, not to mention our seeds business, which is sometimes overlooked, but is a phenomenal, very profitable business. We happen to have a lot of horses that are in the right subcategories right now and they're doing right pretty well.

[Sean Connolly, President and CEO at Conagra Brands]

I think part of the strong number that you just referenced, Max, was Swiss Miss being particularly high. I wouldn't get overly excited about that. That's timing because obviously Swiss Miss was down last quarter because of the weather. But the underlying performance in our Snacks business relative to the broader space that you're pointing out remains very strong. And I would attribute it to the right subcategories and the right brands.

[Sean Connolly, President and CEO at Conagra Brands]

And just a quick public service announcement on our new acquisition of Fatty Smoked Meat Sticks. Our fatty business is now fully integrated. It's doing extremely well. It's getting incredible resonance with our retail customers. And if you have not eaten a fatty meat stick yet, I encourage you not just to eat one, but eat it side by side versus some of the other new players on the market.

[Sean Connolly, President and CEO at Conagra Brands]

And I think you'll see that we win the taste test hands down.

[Max Gumport, Director - Equity Research at BNP Paribas]

Great. Thanks very much. I'll leave it there.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Mr. Nisis for any closing remarks. Please go ahead, sir.

[Matthew Neisius, Sr. Director, Head of Investor Relations at Conagra Brands]

Thank you, Chuck, and thank you all for joining us today. Please reach out to Investor Relations with any additional questions. Have a great day.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Matthew Neisius, Sr. Director, Head of Investor Relations
• Sean Connolly, President and CEO
• David Marberger, Executive VP & CFO

Analysts

• Andrew Lazar, Managing Director at Barclays
• Ken Goldman, Managing Director at J.P. Morgan
• Leah Jordan, Analyst at Goldman Sachs
• Thomas Palmer, Vice President, Senior Equity Research Analyst at Citi
• Christopher Carey, Equity Analyst - Head of Consumer Staples Research at Wells Fargo
• Yasmine Deswandhy, Equity Research Associate at Bank of America Merrill Lynch
• Alexia Howard, Analyst at Bernstein
• Megan Clapp, Executive Director at Morgan Stanley
• Max Gumport, Director - Equity Research at BNP Paribas