Notes and Analysis from Campbell Soup’s Fiscal 2022 Investor Day

Since 2019, Campbell Soup Company has jettisoned several businesses to focus on its core Meals and Beverage (M&B) and Snacks segments.  It has also acquired new growth platforms in Pacific Foods and Snyder’s-Lance.  Its $1 billion enterprise cost savings program is now 83% complete.

Although sales benefited from the pandemic, Campbell is now coping with the negative indirect effects, including inflation, labor shortages and supply chain disruptions, though their impact should diminish over time.  The company also faces sales headwinds as more consumers return to the workplace and eat more meals away from home.

Despite these challenges, Campbell has detailed strategies to pursue sales growth and margin expansion.  It aims to stabilize the performance of its Meals and Beverage business and restore its 21% operating margin by fiscal 2025.  It sees Snacks as its growth engine, with a plan to increase its operating margin by 400 bp to 17%.

With the current challenges, sales and earnings are expected to decline this year.  In fiscal 2023, the company may restore its long-term growth algorithm of 2% organic sales growth, 4%-6% adjusted EBIT growth and 6%-8% adjusted EPS growth.  Together with its projected dividend yield of 3%, the algorithm could produce an annual shareholder return of 9%-11%.

Despite the risk of an earnings shortfall in the next couple of quarters, I have assigned a BUY rating to Campbell’s stock with a price target of $50.  Along with its current 3.4% yield, the stock has total return potential of 18.7% in the next 6-12 months.

This is a summary of my report on Campbell Soup Company. To obtain a copy of the full report, reach out to me directly.

December 30, 2021

Stephen P. Percoco
Lark Research
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© 2022 by Stephen P. Percoco, Lark Research.   All rights reserved.

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