Conagra Brands (CAG) delivered a timing-driven Q1 fiscal 2027 earnings beat, while the H1 reset remains on track but the company still needs to demonstrate sustained improvement in underlying performance, RBC Capital Markets said in a Thursday note.

The brokerage said Conagra's Q1 adjusted earnings per share of $0.41 topped the $0.29 consensus, while adjusted operating margin of 11.5% exceeded guidance and consensus, driven by SG&A timing, a tariff refund, favorable protein costs and stronger Ardent Mills results, with some benefits expected to moderate in Q2.

Management reiterated its fiscal 2027 guidance, with RBC expecting Q2 to mark the margin trough. The company expects Q2 organic sales to decline 2%, while full-year cost of goods sold inflation is seen near the high end of its 5% to 6% range due to higher transportation costs.

RBC said frozen pricing is just entering the market, leaving elasticity uncertain. The brokerage cut its Q2 adjusted EPS estimate to $0.33 from $0.41, while raising its fiscal 2027 estimate to $1.47 from $1.45 and lowering organic sales growth to negative 2.1% from negative 1.7%.

RBC reiterated its Sector Perform rating on the stock with a $14 price target.

Conagra Brands shares were down 3% in Thursday trading.

Price: 13.04, Change: -0.40, Percent Change: -3.01