Key Points
Conagra's stock declined by nearly 50% in the past five years.
The company's dividend remains in tact and the current yield is 7.36%.
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Conagra Brands' (NYSE: CAG) stock is relatively inexpensive right now. Trading below $20, it may look like a buy, but the company's fundamentals tell a story of challenges and significant headwinds. What's going on with Conagra, and is it worth a long-term investment? Let's dive in deeper.
A stale brand?
Conagra is a century-old consumer packaged goods (CPG) food company with several recognizable brands under its umbrella, including Marie Callender's, Healthy Choice, and Duncan Hines. The consumer staples stock has had a rough go over the past five years, declining nearly 50% in that time. Thus far this year, though, it's rebounded slightly, and is up over 8%.
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Conagra does pay a dividend, and its current yield is 7.36%. On the surface, this seems great, but upon deeper inspection, it raises some questions. In addition to the stock price's decline, the company's free cash flow is expected to drop substantially in 2026. For the first half of fiscal 2026, free cash flow decreased from the prior year by $313 million. The company hasn't announced a cut to dividends, but it's hard not to think this may be on the table if Conagra's finances don't improve.
The CPG giant faces tremendous pressure as consumer sentiment shifts away from processed foods, leading to a decline in sales. In its second-quarter 2026 earnings, Conagra reported a 6.8% decline in net sales and an operating margin of -20.1%.
Image source: Getty Images.
There is some optimism
Inflation, tariffs, and operational inefficiencies are headwinds for Conagra, but its CEO, Sean Connolly, has a more positive outlook. In the earnings release last December, Connolly stated, "While we continued to navigate a challenging consumer environment in the second quarter, I am pleased with the continued underlying momentum we are seeing across the business."
Connolly reaffirmed the company's 2026 guidance and also said Conagra is well-positioned to return to organic net sales growth. While Conagra's executives are taking a positive outlook, analysts are a bit more cautious and collectively rate the stock as a "hold." The average price target for Conagra is $19.11. The stock is currently slightly under that as of market close on March 9.
Conagra did announce a $220 million investment to expand a chicken production plant in Arkansas. This infrastructure upgrade is a five-year investment that should result in around 100 new jobs.
Wait and see with Conagra
While Conagra's executives have a more positive outlook and feel momentum is heading in the right direction, I'm not sure Conagra is a "buy" just yet. If the company delivers on its guidance for this year, then I would consider going long on Conagra.
Macroeconomic trends such as inflation and tariffs affecting Conagra don't make me as nervous as the overall consumer sentiment, which has, for years, drifted away from processed foods toward fresher ingredient options. Conagra needs to align its brands more closely with this consumer narrative. For now, however, this is a stock I'd rather play wait-and-see than commit to purchase.
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
