Campbell Soup (CPB) 23Q1 Update

Campbell Soup Company (CPB) reported much stronger than expected 23Q1 net sales and profits (vs. my estimates).  Net sales were $2.58 billion, 15% above 22Q1 and 9% above my estimate.  Diluted Non-GAAP EPS was $1.02, up 14% YOY and better than my $0.69 estimate.

The rise in sales was attributable to price increases implemented to counter inflation.  Sales volume in both Meals & Beverages and Snacks declined by 1%.  On the cost side, CPB benefited from productivity initiatives and efforts to strengthen its supply chain.

Management said that these actions enabled Campbell’s to mitigate inflationary pressure in the quarter.  It expects that this momentum will carry through for the rest of the fiscal year.  Thus, it has raised its full year guidance.

It now expects net sales growth of 7%-9%, up 3 pp.  It also expects adjusted non-GAAP EPS of $2.90-$3.00, up 2%-5% over 2022’s $2.85 and $0.05 above its initial guidance.

The stock hit a new 52-week high last week and closed at $55.66, above my previous price target of $53.  With the revised guidance, I have raised my estimates for 2023 non-GAAP EPS by $0.14 to $3.04 and for 2024 by $0.11 to $3.15.  At a multiple of 19 times fiscal 2024 non-GAAP EPS, which is roughly in line with the peer group average, my revised price target is $59.  With the recent run in the stock, the potential total return, including the 2.7% dividend yield, is 8.5%, which merits a neutral rating.  While the price increases held in 23Q1, it remains to be seen whether they will hold for the balance of the year, as supply chain pressures continue to ease industrywide and with the pressures on consumer budgets from higher inflation.

This is a summary of my recent update report on Campbell Soup Company (CPB). To obtain a copy of the full report, please reach out to me using the contact information provided below.

December 15, 2022

Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250

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