# Conagra Brands (CAG) Financial Model Free Excel 3-statement financial model and company analysis for Conagra Brands. - Canonical: https://finamodel.com/companies/conagra-brands - Industry: Food - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/CAG.xlsx ## Model Purpose This model provides a comprehensive three-statement forecast and discounted cash flow (DCF) valuation for Conagra Brands to help an equity research analyst determine the intrinsic value of the company's shares and assess its deleveraging trajectory following historical acquisitions. ## Company Overview Conagra Brands is one of North America's leading branded food companies, manufacturing and selling a wide variety of shelf-stable, refrigerated, and frozen packaged foods. The company operates a portfolio of iconic and emerging brands, including Birds Eye, Duncan Hines, Healthy Choice, Marie Callender's, Reddi-wip, and Slim Jim. Business segments by approximate revenue contribution: * **Grocery & Snacks** (~41%): Shelf-stable food products sold in US retail channels. * **Refrigerated & Frozen** (~41%): Temperature-controlled food products sold in US retail channels. * **Foodservice** (~10%): Branded products sold to restaurants, commercial, and institutional establishments in the US. * **International** (~8%): Branded food products sold in various retail and foodservice channels outside the US. Key geographies: The United States dominates the revenue mix, accounting for over 90% of total sales. Business model type: Asset-heavy manufacturing and distribution of consumer packaged goods (CPG). Competitive position: Conagra holds leading market shares in several US food categories (frozen vegetables, meat snacks, frozen meals) and competes with other major CPG firms like Kraft Heinz, General Mills, and Campbell Soup. Walmart is the company's largest customer, accounting for approximately 29% of consolidated net sales. Recent major events: The company has focused heavily on deleveraging its balance sheet following the transformational acquisition of Pinnacle Foods in 2018, while recently navigating supply chain constraints, input cost inflation, and subsequent price/mix adjustments to restore gross margins. ## Revenue Deep Dive ### Grocery & Snacks * **Segment name**: Grocery & Snacks * **Revenue driver formula**: Prior Year Revenue x (1 + Organic Volume Growth + Organic Price/Mix Growth + M&A Impact) * **Historical growth rate**: Flat to low single-digit declines recently due to elasticities from pricing actions. * **Key growth levers and headwinds**: Innovation in the snacking portfolio (e.g., meat snacks, popcorn) acts as a growth lever, while consumer pushback against cumulative inflation serves as a headwind. * **Pricing dynamics**: Highly competitive retail pricing environment; relies on trade promotions and brand equity to maintain pricing power. * **Revenue recognition notes**: Recognised upon transfer of control to the customer (typically upon delivery), net of variable consideration like trade promotions and consumer coupons. * **Seasonality**: Stronger sales typically occur in the fiscal second and third quarters (autumn and winter months) due to holiday baking and increased consumption of hot meals. ### Refrigerated & Frozen * **Segment name**: Refrigerated & Frozen * **Revenue driver formula**: Prior Year Revenue x (1 + Organic Volume Growth + Organic Price/Mix Growth + M&A Impact) * **Historical growth rate**: Low single-digit growth historically, recently pressured by supply constraints. * **Key growth levers and headwinds**: Premiumisation of frozen meals (Healthy Choice) drives growth, but capacity constraints and freezer aisle competition are persistent headwinds. * **Pricing dynamics**: Similar to Grocery & Snacks, but with higher sensitivity to cold-chain logistics costs. * **Revenue recognition notes**: Recognised upon delivery, net of trade allowances. * **Seasonality**: Higher demand during winter months for frozen vegetables and single-serve meals. ### International * **Segment name**: International * **Revenue driver formula**: Prior Year Revenue x (1 + Organic Volume Growth + Organic Price/Mix Growth) x (1 + FX Impact) * **Historical growth rate**: Low single-digit growth, heavily distorted by currency fluctuations. * **Key growth levers and headwinds**: Expansion in Canada and Mexico; headwinds include foreign exchange volatility (especially the Mexican Peso). * **Pricing dynamics**: Localised pricing strategies to manage currency devaluation and local inflation. * **Revenue recognition notes**: Standard delivery-based recognition. * **Seasonality**: Broadly consistent throughout the year. ### Foodservice * **Segment name**: Foodservice * **Revenue driver formula**: Prior Year Revenue x (1 + Organic Volume Growth + Organic Price/Mix Growth) * **Historical growth rate**: Mid single-digit growth as the sector recovered from pandemic lows, normalising to low single digits. * **Key growth levers and headwinds**: Restaurant footfall and institutional catering demand drive volumes. * **Pricing dynamics**: Contractual and spot pricing, often tied to commodity indices for bulk items. * **Revenue recognition notes**: Standard delivery-based recognition. * **Seasonality**: Correlates with restaurant traffic and school term times. ## Cost Structure ### Variable Costs / COGS * **Line-by-line breakdown**: Ingredients (meat, grains, vegetables), packaging materials, direct labour, manufacturing overhead, and inbound/outbound freight. * **Gross margin range**: 23.5% to 26.0% over the last 5 years. * **Key input costs and commodity exposures**: Proteins, edible oils, wheat, corn, and packaging resins. * **How COGS scales with revenue**: Largely linear with volume, but subject to operating leverage; lower volumes create unabsorbed overhead which compresses margins. ### Operating Expenses * **R&D**: Not material enough to be broken out on the face of the income statement; typically embedded in SG&A. * **SG&A**: Broken down into Advertising and Promotion (A&P) and general administrative expenses. A&P is a critical driver of brand equity. * **Depreciation & Amortisation**: Typically runs at 3.0% to 3.5% of revenue. * **Stock-Based Compensation**: Relatively small, typically under 0.5% of revenue. * **Restructuring / one-time charges**: Frequent non-cash impairment charges on goodwill and brand intangibles, plus occasional restructuring plans for supply chain optimisation. ### Margin Profile * **Gross margin**: 23.5% to 26.0%. * **EBITDA margin**: 18.0% to 20.0%. * **Operating margin**: 10.0% to 14.0% (adjusted). * **Margin trend**: Margins compressed during the peak inflation period of 2022-2023 but have stabilised as pricing caught up with input costs and supply chain disruptions eased. ## Balance Sheet Structure * **Total assets**: Approximately $21 billion to $22 billion. * **Key asset categories**: Goodwill and Intangible Assets dominate the balance sheet due to historical acquisitions. * **Goodwill & intangibles as % of total assets**: Approximately 65% to 70%. * **Working capital profile**: * **Days Sales Outstanding (DSO)**: 25 to 30 days. * **Days Inventory Outstanding (DIO)**: 55 to 65 days. * **Days Payable Outstanding (DPO)**: 70 to 80 days. * **Net working capital as % of revenue**: Typically slightly negative or near zero, providing a modest source of cash as the business grows. * **PP&E**: Manufacturing plants, warehouses, and equipment. Useful lives range from 3 to 40 years. * **Right-of-use assets / operating leases**: Material but manageable, representing leased distribution centres and office space. ## Capital Expenditure & Investment * **Capex as % of revenue**: 3.5% to 4.0% (historically around $400 million to $500 million annually). * **Maintenance capex vs. growth capex**: Roughly 60% maintenance and 40% growth/productivity (automation investments). * **Major capex programmes underway**: Investments in supply chain automation and capacity expansion for the frozen meals and snacks segments. * **Capitalised software**: Minimal compared to physical plant investments. * **M&A pattern**: Historically a transformational acquirer (Pinnacle Foods), but currently focused on organic growth, debt paydown, and minor portfolio reshaping (divesting non-core brands). ## Debt & Capital Structure * **Total debt**: Approximately $7.5 billion to $8.0 billion (Net debt around $7.3 billion). * **Debt/EBITDA ratio**: Target is below 3.5x; currently operating around 3.8x. * **Credit rating**: Investment grade (BBB- / Baa3). * **Key debt instruments**: Senior unsecured notes, a $2 billion revolving credit facility, and commercial paper. * **Maturity profile**: Staggered bond maturities over the next 10 to 20 years. * **Interest rate profile**: Approximately 90% fixed rate, with commercial paper providing floating rate exposure. * **Covenants**: Maximum net leverage ratio of 4.5x (steps up for acquisitions) and minimum interest coverage of 3.0x. * **Share repurchase programme**: Opportunistic; the company prioritises dividends and debt reduction over aggressive buybacks. * **Dividend policy**: Annual dividend of $1.40 per share, representing a payout ratio of roughly 50% to 60% of adjusted EPS. ## Cash Flow Characteristics * **Operating cash flow conversion**: Very strong; OCF typically exceeds 100% of Net Income due to high non-cash D&A and impairment charges. * **Free cash flow margin**: 8.0% to 10.0% of revenue. * **Major non-cash items**: Depreciation, amortisation, goodwill/brand impairment charges, and equity method investment earnings (Ardent Mills). * **Working capital cash flow impact**: Inventory management is the biggest swing factor year-to-year. * **Capex intensity**: Relatively low, allowing for strong free cash flow generation. * **Cash tax rate vs. GAAP effective tax rate**: Cash taxes are generally aligned with the effective tax rate of 23% to 24%, barring one-off restructuring tax benefits. ## Sheet Structure 1. **Assumptions**: Hardcoded inputs for macroeconomic drivers, segment growth rates, margin profiles, working capital days, and capital allocation policies. 2. **Revenue Build**: Segment-level build for Grocery & Snacks, Refrigerated & Frozen, International, and Foodservice, driven by volume and price/mix assumptions. 3. **Income Statement**: Consolidated P&L mirroring the 10-K, including specific lines for Advertising and Promotion, and Equity Method Investment Earnings. 4. **Balance Sheet**: Standard asset and liability categories, explicitly breaking out Goodwill, Brands/Trademarks, and Operating Lease Assets. 5. **Cash Flow Statement**: Indirect method starting from Net Income, adjusting for non-cash items (D&A, impairments), working capital changes, capex, and financing activities. 6. **Working Capital Schedule**: Calculation of receivables, inventory, and payables based on DSO, DIO, and DPO. 7. **PPE & Intangibles Schedule**: Roll-forward of gross PP&E, accumulated depreciation, goodwill, and brand intangibles. 8. **Debt Schedule**: Tranche-by-tranche build of senior notes, commercial paper, and the revolving credit facility, calculating interest expense and tracking covenant compliance. 9. **DCF Valuation**: Unlevered free cash flow calculation, WACC build, terminal value calculation, and implied share price output. ## Key Financial Relationships 1. `Grocery & Snacks Revenue = Prior Year Grocery & Snacks Revenue * (1 + G&S Volume Growth + G&S Price/Mix Growth)` 2. `Refrigerated & Frozen Revenue = Prior Year Refrigerated & Frozen Revenue * (1 + R&F Volume Growth + R&F Price/Mix Growth)` 3. `International Revenue = Prior Year International Revenue * (1 + Int Volume Growth + Int Price/Mix Growth + FX Impact)` 4. `Foodservice Revenue = Prior Year Foodservice Revenue * (1 + FS Volume Growth + FS Price/Mix Growth)` 5. `Consolidated Net Sales = Grocery & Snacks Revenue + Refrigerated & Frozen Revenue + International Revenue + Foodservice Revenue` 6. `Cost of Goods Sold = Consolidated Net Sales * (1 - Gross Margin %)` 7. `Advertising and Promotion Expense = Consolidated Net Sales * A&P Margin %` 8. `Adjusted Operating Profit = Consolidated Net Sales - COGS - SG&A (including A&P)` 9. `Accounts Receivable = (Consolidated Net Sales / 365) * DSO` 10. `Inventory = (COGS / 365) * DIO` 11. `Accounts Payable = (COGS / 365) * DPO` 12. `Interest Expense = (Beginning Total Debt + Ending Total Debt) / 2 * Weighted Average Interest Rate` 13. `Net Debt to EBITDA = (Total Debt - Cash and Cash Equivalents) / Adjusted EBITDA` 14. `Free Cash Flow = Operating Cash Flow - Capital Expenditures` ## Cross-Sheet Dependencies * The **Assumptions** sheet feeds all schedules. * The **Revenue Build** feeds the top line of the **Income Statement**. * The **Income Statement** generates Net Income, which flows to the top of the **Cash Flow Statement** and into Retained Earnings on the **Balance Sheet**. * The **Working Capital Schedule** uses Revenue and COGS from the **Income Statement** to calculate balances, which flow to the **Balance Sheet** and generate cash flow impacts on the **Cash Flow Statement**. * The **Debt Schedule** creates a circular reference: interest expense reduces Net Income, which reduces cash flow, which dictates the need for revolver borrowing or debt paydown, which in turn changes the debt balance and the resulting interest expense. * The **DCF Valuation** pulls NOPAT from the **Income Statement**, D&A and Capex from the **Cash Flow Statement**, and working capital changes from the **Working Capital Schedule**. ## Sign Convention * **Income Statement**: Revenues are positive. Expenses (COGS, SG&A, Interest, Taxes) are entered as positive numbers and subtracted in total formulas. * **Balance Sheet**: All assets, liabilities, and equity balances are positive. * **Cash Flow Statement**: Cash inflows are positive. Cash outflows (capex, dividends, debt paydown) are negative. Increases in working capital assets are negative; increases in working capital liabilities are positive. ## Things Most Likely to Go Wrong 1. **Goodwill Impairments**: Conagra frequently takes massive, non-cash impairment charges on its legacy brands. The model must exclude these from Adjusted EBITDA and Adjusted EPS to reflect underlying cash generation. 2. **Ardent Mills Joint Venture**: Equity method investment earnings (primarily from the Ardent Mills flour milling JV) are reported below operating profit but are a material contributor to Net Income and EBITDA. Do not miss this line item. 3. **Walmart Concentration**: With 29% of sales tied to one retailer, aggressive inventory destocking by Walmart can cause sudden, sharp volume declines that break historical trend lines. 4. **A&P vs SG&A**: Conagra explicitly breaks out Advertising and Promotion from general SG&A. Modelling them together obscures management's brand investment strategy. 5. **Divestitures**: The company occasionally divests small brands (e.g., Wesson oil, Peter Pan peanut butter). Historical revenue bases must be adjusted to calculate true organic growth. 6. **Pension Income/Expense**: Non-service pension income can distort net income. This should be excluded from core operating metrics. 7. **Debt Covenants**: The model must track the 4.5x Net Debt to EBITDA covenant. If the model forecasts a breach, it must flag a warning, as this would trigger a technical default or require a costly waiver. 8. **Fiscal Year Timing**: Conagra's fiscal year ends in late May. Macroeconomic data and peer benchmarking must be calendarised correctly to avoid mismatch errors. ## Validation Checks 1. "Gross margin should be in the 23.5% to 26.0% range; flag if outside this band." 2. "Net Debt to EBITDA should remain below 4.5x per the credit facility covenant." 3. "Capex as a % of revenue should run between 3.5% and 4.5%." 4. "Free Cash Flow conversion (FCF / Net Income) should be >100% due to high non-cash D&A." 5. "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period." 6. "Dividend payout ratio should remain within 50% to 65% of Adjusted EPS based on stated policy." 7. "Effective tax rate should be between 23.0% and 24.5%." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Grocery & Snacks Organic Growth | 0.5 | % | Assumes slight volume recovery offsetting flat pricing. | | Refrigerated & Frozen Organic Growth | 1.5 | % | Driven by premiumisation in frozen meals. | | International Organic Growth | 1.0 | % | Steady growth offset by minor FX headwinds. | | Foodservice Organic Growth | 2.5 | % | Continued normalisation of away-from-home eating. | | Gross Margin | 24.5 | % | Reflects recent recovery from inflation peaks. | | A&P as % of Revenue | 2.5 | % | Historical average required to maintain brand equity. | | Other SG&A as % of Revenue | 10.5 | % | Historical average reflecting corporate overhead. | | DSO (Days Sales Outstanding) | 28 | Days | Based on recent balance sheet averages. | | DIO (Days Inventory Outstanding) | 60 | Days | Based on recent balance sheet averages. | | DPO (Days Payable Outstanding) | 75 | Days | Based on recent balance sheet averages. | | Capex as % of Revenue | 3.9 | % | Aligns with management guidance of ~$450M annually. | | Effective Tax Rate | 23.5 | % | Management guidance for the fiscal year. | | Annual Dividend per Share | 1.40 | $ | Current stated dividend policy. | | Diluted Share Count | 480 | Millions | Current outstanding diluted shares. | | Weighted Average Interest Rate | 5.0 | % | Blended rate of fixed bonds and floating commercial paper. | | WACC | 7.5 | % | Standard discount rate for a mature, defensive staples business. | | Terminal Growth Rate | 1.5 | % | Long-term inflation-linked growth for packaged foods. | ## Data Sources & Benchmarks * **Filings**: SEC EDGAR (Form 10-K, 10-Q, 8-K) and the Conagra Brands Investor Relations website. * **Key Peers**: Kraft Heinz (KHC), General Mills (GIS), Campbell Soup (CPB), Kellanova (K). * **Industry Data**: Circana (formerly IRI) point-of-sale (POS) scanner data for US retail market share and category growth. * **Consensus Estimates**: Bloomberg or FactSet for forward-looking EPS and revenue consensus. ## Sources * Conagra Brands Fiscal 2025 Form 10-K (SEC EDGAR) * Conagra Brands Q3 Fiscal 2026 Earnings Release and Presentation (Investor Relations website) * S&P Global Ratings Research Update on Conagra Brands Inc. * Macrotrends and GuruFocus historical financial data for CAG --- ## Frequently asked questions ### What does Conagra Brands do, and what are its main product categories? Conagra Brands is a leading North American branded food company that manufactures and sells a wide variety of shelf-stable, refrigerated, and frozen packaged foods. Its portfolio includes iconic brands like Birds Eye, Duncan Hines, and Healthy Choice, with primary segments being Grocery & Snacks and Refrigerated & Frozen products. ### What are the primary revenue drivers for Conagra Brands, and which segments contribute most to its sales? Conagra Brands' revenue is primarily driven by sales of its branded food products across US retail channels. The Grocery & Snacks and Refrigerated & Frozen segments each contribute approximately 41% of total revenue, with Foodservice and International segments making up the remainder. ### What is Conagra Brands' typical capital expenditure as a percentage of revenue, and what are its major capex programs? Conagra Brands typically allocates 3.5% to 4.0% of its revenue to capital expenditures, historically amounting to $400 million to $500 million annually. Major capex programs are currently focused on supply chain automation and capacity expansion for its frozen meals and snacks segments. ### What is the purpose of the Conagra Brands financial model, and what key valuation method does it employ? The Conagra Brands financial model provides a comprehensive three-statement forecast to help equity research analysts determine the intrinsic value of the company's shares. It employs a discounted cash flow (DCF) valuation to assess the company's value and its deleveraging trajectory. ### Can I download an Excel financial model for Conagra Brands, and what forecast horizon does it cover? Yes, an Excel financial model for Conagra Brands is available for download. This model provides a forecast horizon covering fiscal years FY2026 through FY2030. ### What are some key financial assumptions used in the Conagra Brands model, such as revenue growth and COGS percentage? Key financial assumptions in the Conagra Brands model include a Revenue Growth rate of approximately 6.51% and a COGS as a percentage of Revenue of about 72.96%. Other assumptions cover R&D, SGA, D&A, and tax rates. [Interactive forecast calculator](https://finamodel.com/companies/conagra-brands/forecast)