Conagra Brands (CAG) reported a solid fiscal Q1 EPS beat, driven by slightly better sales, timing benefits related to selling, general, and administrative expenses, lower-than-expected inflation, and a higher contribution from Ardent Mills, UBS said in a note Wednesday.

Despite the strong start, Conagra reiterated its full-year outlook and highlighted that Q2 will likely be more challenged from a top and bottom line perspective, according to the note.

While the brokerage is encouraged by Conagra's fiscal Q1 performance, it believes the path forward remains unchanged and the debate will continue to center on when organic sales can show sustained improvement, the note added.

The company has reaffirmed its fiscal 2027 guidance and expects adjusted EPS of $1.40 to $1.50, versus Street estimates of $1.44, underpinned by organic sales declines in the range of 1% to 3% and adjusted operating margin of 10% to 10.5%, the brokerage said.

Management expects price and mix to accelerate from fiscal Q1 levels as further pricing actions are implemented, resulting in greater volume declines at the total company level in the near term, UBS added.

UBS kept a neutral rating on Conagra Brands with a price target of $14.

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