Campbell Soup (CPB) 24Q1 Update

Campbell Soup Company (CPB) reported 24Q1 diluted GAAP EPS of $0.78, below last year’s $0.99 and also below my estimate of $0.82.  Non-GAAP EPS was $0.91, below last year’s $1.02, but above my estimate of $0.85.  Net sales were $2.52 billion, 2.2% below 23Q1 and below my estimate.

Results were in line with management’s expectations, as the company was up against a tough prior year comparison (when sales were up 15% due to price increases, brand strength and continued recovery in supply).  Sales in the Meals & Beverages segment decreased 4%, with sales volume down 6%, partially offset by net price realization of 2%.  M&B operating earnings declined 13%.  Sales in the Snacks segment declined 1%, as a 4% decrease in volume and 2% decrease due to a divestiture were mostly offset by net price realization of 5%.  Snacks operating earnings increased by 5%.  Management said that the holiday season is off to a great start.  It expects to build sales momentum through the rest of the fiscal year.  Consequently, it expressed confidence in its reaffirmed fiscal 2024 guidance.

That guidance anticipates net sales growth of ‑0.5% to +1.5% (including a 0.5% decline due to last year’s sale of the Emerald nuts business), organic net sales growth of 0% to 2%, adjusted EBIT growth of 3% to 5% and adjusted EPS growth of 3% to 5% (or $3.09 to $3.15). Management’s guidance does not include the potential impact of the Sovos Brands acquisition, which is now expected to close sometime during calendar 2024, with a mid-2024 target (i.e. near the end of the fiscal year). Updated for 24Q1 results, I have reduced my fiscal 2024 GAAP EPS estimate to $2.74 (from $2.82) and my non-GAAP estimate to $3.00 (from $3.02).  As a reminder, my estimates are below management’s guidance of $3.09-$3.15 because they include the estimated impact of the Sovos Brands acquisition.  For fiscal 2025, my GAAP EPS estimate of $2.65 and non-GAAP EPS estimate of $2.95 are unchanged.  Since my last report, Campbell’s stock has risen 6%, compared with the S&P 500’s 12.0% gain and peers’ 8.4% gain.  In my view, Campbell’s performance remains on track and so I am maintaining my 12-month price target of $50 and my performance rating of “1” (Buy).  The revised target price represents a potential return of nearly 20%, including the stock’s 3.4% dividend yield.

This is a summary of my recent 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 11, 2023 (The report’s publish date is December 8, 2023.)

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

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