Investing.com -- Moody’s Ratings today confirmed the Baa3 ratings for Conagra Brands (NYSE: CAG ), Inc., including its senior unsecured notes, senior unsecured bank credit facility, issuer rating, senior unsecured medium term note program, and Prime-3 commercial paper ratings. The ratings agency switched the outlook from positive to stable.
The adjustment to a stable outlook is due to recent underperformance in operating results and a reduction in guidance. Conagra has been dealing with several operational challenges, which it expects to rectify, and macroeconomic challenges that increased costs and reduced volume. These issues have led to a slight weakening of credit metrics and will slow the company’s progress towards its 3.0x net leverage target, which was 3.59x by the company’s calculation as of February 2025.
Moody’s anticipates Conagra will continue to target debt and leverage reduction, but the journey to its target will be slower than initially planned. It is expected that Conagra will use the proceeds from its recently announced Chef Boyardee sale to assist in paying down debt. The EBITDA margin is projected to start showing modest growth in the fiscal year ending May 2026.
Despite these challenges, Moody’s affirmed the ratings as the metrics remain comfortably positioned for the current Baa3 rating. Conagra is investing in its brands and implementing operating strategies to restore volume growth and sustainably increase earnings amidst cost-conscious consumers and high competition.
The company’s Baa3 ratings are supported by a diverse portfolio of well-known, branded food products, positive free cash flow, and relatively large scale. After the 2018 leveraged acquisition of Pinnacle Foods, Conagra significantly reduced its financial leverage. The company continues to adjust its portfolio into higher growth areas, such as through the divestiture of Chef Boyardee and the August 2024 acquisition of Sweetwood Smoke.
Conagra maintains a $2.0 billion commercial paper program, with $535 million outstanding as of February 2025. To support its commercial paper program and other short-term financing needs, Conagra maintains an undrawn $2.0 billion multi-year revolving credit facility due August 26, 2027. The company faces roughly $1.5 billion in maturities between October and November 2025 that would reduce liquidity if not proactively addressed.
The stable outlook reflects Moody’s expectation that volumes will stabilize during fiscal 2026, and that Conagra will maintain or slightly grow its operating profit margin. A ratings upgrade could be possible if Conagra generates stable to growing volumes, organic revenue and EBITDA while addressing recent operating challenges. A downgrade is possible if operating performance deteriorates due to factors such as market share losses, pricing pressure or cost increases.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.