Conagra Brands Is Set to Invest $220 Million in a Manufacturing Plant But Its Stock is Down This Week. Is the Packaged Foods Company a Buy in 2026?

To compete effectively in the packaged food industry, companies need to align their brands and products with consumer buying habits. Companies are always making changes to keep pace with industry shifts. Conagra Brands (CAG +1.45%) is doing that, as it looks to expand production in a key facility. Here's why that isn't a good reason to buy the stock.

Conagra is making a $220 million upgrade

It is hardly bad news that Conagra is investing $220 million to add capacity to a chicken processing facility. It is making this investment due to the strong demand for a recently introduced fried chicken product. And there could be more positive news in the fried chicken space, as the company plans to introduce more innovation in the area based on the success of its initial product.

The problem here is that every consumer staples company has to lean into innovation or they risk falling out of step with consumers. That's really all Conagra is doing here. And it is in support of just one product in a much larger portfolio. The big question investors should be asking is how the company as a whole is performing. The answer is not very good.

Conagra is not an industry leader

To be fair, the entire packaged food sector is facing headwinds right now. Consumers are tightening their budgets because of economic concerns, and there has been a shift toward healthier food options. That said, Conagra's portfolio is filled with second-tier brands, and that's long been the case. And it has been struggling financially.

Notably, in the fiscal second quarter of 2026, the company's sales fell 6.8%, with organic sales off by 3%. Earnings in the quarter were deeply in the red because the company wrote down the value of some of its brands, effectively admitting they weren't as valuable as it had thought. Investors looking to own companies that are industry leaders should probably avoid Conagra.

Conagra's yield is huge for a reason

For many, the big draw with Conagra will be its lofty 8.6% dividend yield. The company is projecting that its adjusted earnings will cover the dividend in fiscal 2026, but most long-term investors will probably be better off with a better-positioned consumer staples company even if that means accepting a lower yield.

While the capital investments being made are good news, they must be couched within Conagra's much larger business framework. And that framework just isn't that impressive.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.