Conagra Brands (CAG): Earnings Surge Amid Falling Revenue — Dividend Durability Under the Microscope

FY2025 results: a paradox — big bottom‑line bounce, softer top line#

Conagra Brands ([CAG]) closed FY2025 with a financial paradox that reshapes the near-term story for income investors: revenue declined to $11.61B (-3.64% YoY) while GAAP net income rose to $1.15B, an increase of +231.21% versus FY2024. Those numbers — disclosed in Conagra’s FY2025 filings — create immediate tension between profitability improvement and underlying demand weakness, and they force a fresh look at dividend sustainability given the company’s above‑market yield. According to Conagra’s FY2025 filings (filed July 10, 2025), the improved net result was driven by a combination of higher operating leverage and one‑time items that materially boosted reported earnings even as revenue contracted. For market participants watching yield, the key question is not the headline yield itself but whether free cash flow and balance‑sheet flexibility will meaningfully cover the payout going forward.Conagra FY2025 Form 10-K

The contrast is immediate and consequential: margin expansion and higher reported earnings can underwrite distributions only to the extent cash generation follows. In FY2025 Conagra produced $1.30B of free cash flow, returned $669.2MM in dividends and repurchased $64MM of stock, while ending the year with $68MM of cash on the balance sheet and $8.24B of net debt. These cash‑flow and leverage metrics are the operational reality behind the headline yield and must be central to any assessment of the durability of Conagra’s payout policy.Conagra FY2025 Form 10-K

Income statement trends and quality of earnings#

At the revenue line Conagra’s FY2025 result of $11.61B represents a modest contraction versus FY2024’s $12.05B. The decline reflects a mix of volume pressure in selected center‑of‑store categories and price/mix dynamics that were only partially able to offset commodity and packaging cost headwinds. Despite the revenue contraction, reported operating income reached $1.90B, which implies an operating margin of 16.36% for FY2025 — a notable improvement versus the mid‑teens trajectory of prior years. EBITDA was reported at $1.96B, representing an EBITDA margin of 16.87%.

The net‑income swing to $1.15B was aided by tax and other non‑operating items; therefore, while GAAP net income is materially higher, the quality of that improvement requires careful parsing. Conagra’s operating cash flow for FY2025 was $1.69B, and free cash flow (after capex of $389.3MM) was $1.30B. The conversion of EBITDA to free cash flow remains acceptable — FCF margin (FCF/revenue) is roughly 11.19% — but shareholders should note that not all of the GAAP earnings improvement translated into proportionally higher cash on the balance sheet. The company ended FY2025 with only $68MM of cash, indicative of significant cash returned to holders and meaningful gross debt outstanding.Conagra FY2025 Form 10-K

Below is a concise income‑statement summary that highlights the inflection points across four fiscal years and the margins that matter for payout durability.

(Values from Conagra FY2025 filings; margins computed from line items.)Conagra FY2025 Form 10-K

Balance sheet, leverage and notable data inconsistencies#

Conagra’s balance sheet at fiscal year end shows $20.93B of total assets, $8.31B total debt, and $8.24B net debt after subtracting $68MM of cash. Using reported FY2025 EBITDA of $1.96B, the company’s net debt / EBITDA calculates to ~+4.20x. Separately, enterprise value (market cap + debt - cash) based on the last quoted market capitalization of $9.20B and reported debt produces an EV/EBITDA of ~8.90x.

Those independently calculated debt and EV multiples diverge materially from several aggregated ratio fields in the provided dataset that report values such as net‑debt/EBITDA = 0.90x and EV/EBITDA = 5.58x. Where data conflicts appear, priority is given to raw line items (total debt, cash, EBITDA, market capitalization) and the direct calculations that follow from them because aggregated ratios can reflect different vintage adjustments, pro‑forma items, or dataset errors. The reconciliation matters because a net‑debt/EBITDA of ~4.20x signals a materially different leverage profile than 0.90x, and it substantially changes the assessment of how easily Conagra can sustain its dividend if cash generation weakens.Conagra FY2025 Form 10-K

Below is a balance‑sheet and cash‑flow snapshot that underpins the capital‑allocation conversation.

(Values from Conagra FY2025 filings and market capitalization; calculations by Monexa AI.)Conagra FY2025 Form 10-K

The practical implication of these calculations is straightforward: while FCF covers the dividend at roughly +51.40%, leaving some buffer, net debt remains sizeable relative to EBITDA under the direct calculation above. A leverage ratio in the 4x range is not unusual in consumer‑packaged goods after M&A cycles, but it reduces the margin for error if commodity costs or volumes deteriorate and if free cash flow compresses.

Margin drivers and the inflation/price‑mix dynamic#

Conagra’s margin story for FY2025 reflects both operational progress and persistent input volatility. Gross profit of $3.12B produced a gross margin near 26.86%, while operating margin improvement to 16.36% indicates meaningful SG&A and overhead leverage alongside price/mix actions. Management has cited discrete cost‑savings programs, SKU rationalization and targeted price increases in center‑of‑store categories as the primary drivers of margin recovery, and those programs appear to have begun to offset some commodity pressure in FY2025.

However, packaged‑foods companies remain exposed to commodity cycles (grains, vegetable oils), packaging cost swings and freight expenses, and Conagra is no exception. The durability of margin gains will therefore depend on three observable items over the next several quarters: whether commodity costs moderate, whether the company can pass incremental costs through to retail without eroding volumes materially, and whether SG&A savings materialize as planned. The FCF result indicates the company can cover the dividend today, but the cushion is not large enough to absorb a sustained return to negative working‑capital swings or a new commodity shock without either faster deleveraging or reduced cash returns.

Capital allocation: dividends, buybacks and balance‑sheet priorities#

Conagra returned $669.2MM in dividends in FY2025 and repurchased $64MM in shares. The cash payout represented roughly 51.40% of free cash flow and 58.19% of GAAP net income for the year. These coverage metrics show management is maintaining a shareholder‑friendly posture while retaining a meaningful portion of FCF for debt service and strategic actions. The company’s quarterly dividend of $0.35 per share (trailing four quarters = $1.40 per share) translates to a yield of ~7.26% on the prevailing share price, which is attractive but sensitive to both cash flow and leverage trends.

Two capital‑allocation tensions are clear. First, if management prioritizes sustained share buybacks, the pace of deleveraging will slow and reduce flexibility if revenue or margins weaken. Second, if management moves to accelerate debt reduction, the cash available for buybacks and possibly dividends would fall in the near term. The FY2025 pattern — high dividend, modest repurchases — suggests a preference toward steady income distribution combined with measured buybacks, but investors should watch management commentary for any drift in this posture as cash‑generation dynamics evolve.Conagra FY2025 Form 10-K

Competitive context and execution credibility#

Conagra operates in a low‑growth, highly competitive packaged‑foods sector where scale, supply‑chain efficiency and brand portfolio management determine winners and losers. Compared with large peers, Conagra’s margins and return metrics remain within the typical branded‑food range, but the company’s heavy goodwill and intangible base (about $12.92B of goodwill/intangibles at FY2025 year‑end) underscore the historical M&A footprint that must be justified through sustained cash returns. Execution on cost‑reduction programs and price realization will therefore be the primary determinants of whether Conagra can maintain above‑market yield without sacrificing long‑term competitiveness.

Historically, the company has shown capacity to deliver incremental margin by leaning on pricing and productivity; the FY2025 operating margin improvement is the latest evidence. But sustained execution will require consistent evidence of stable volumes and concrete, quantifiable SG&A savings over multiple quarters. The market will look for that evidence in quarterly free cash flow conversion and in the trajectory of net debt/EBITDA.

What this means for investors#

Conagra’s FY2025 results create a clear risk/reward dynamic for income‑oriented investors. On the constructive side, the company generated $1.30B of free cash flow and covered its dividend with cash at roughly 51.40%, leaving scope to continue the payout under current conditions. The operating‑margin recovery and higher reported earnings demonstrate management’s capacity to extract productivity gains and to use price/mix to offset some input costs. Those are tangible positives for dividend durability.

On the cautionary side, independently calculated leverage metrics — net debt / EBITDA of ~4.20x and EV/EBITDA of ~8.90x — paint a balance‑sheet that is tighter than some aggregated datasets imply. Ending cash of $68MM also highlights low absolute liquidity relative to debt maturities and near‑term obligations. That combination reduces the margin of safety if free cash flow weakens or if management elects to accelerate buybacks. The dividend yield of ~7.26% is therefore better read as compensation for elevated operational and leverage risk rather than a simple signal of safety.

Investors should watch three near‑term data points closely: quarterly free cash flow and the FCF‑to‑dividend ratio; the trajectory of net debt / adjusted EBITDA; and management’s quantified progress on cost‑savings or productivity programs. Together those indicators will reveal whether FY2025’s earnings improvement is durable and cash‑backed or predominantly driven by one‑off accounting and tax items.

Key takeaways and conclusion#

Conagra’s FY2025 establishes a mixed but testable narrative. Revenue contraction of -3.64% contrasts with a +231.21% jump in GAAP net income to $1.15B, and the company produced $1.30B of free cash flow while returning $669.2MM in dividends. Independently calculated leverage metrics (net debt / EBITDA 4.20x) and EV/EBITDA (8.90x) are higher than some aggregated fields reported in third‑party datasets, and that difference materially alters the risk calculus around the dividend.

The durability of Conagra’s 7%+ yield depends on sustained FCF conversion, successful delivery of SG&A and productivity targets, and either commodity cost relief or effective price/mix execution that does not permanently erode volumes. If those conditions hold, the dividend is financially supportable; if they do not, the company’s leverage profile and low cash balance amplify the risk that management would need to re‑prioritize cash uses.

Investors should therefore treat CAG as an income exposure that warrants active monitoring of quarterly cash flow, net‑debt trends and management’s progress on quantified cost‑savings, rather than as a hands‑off high‑yield holding. The coming four quarters will be decisive in turning FY2025’s accounting gain into a sustained cash‑flow story — or exposing it as transitory.

(Reported figures and line‑item values are from Conagra Brands FY2025 filings and market data; calculations and ratio reconciliations performed independently by Monexa AI. For primary documents and filings see Conagra investor relations and SEC filings.)Conagra FY2025 Form 10-K