The Campbell’s Company (CPB) reported 25Q2 diluted GAAP EPS of $0.58, compared with last year’s $0.68. Non-GAAP EPS of $0.74 was below last year’s $0.80 and my estimate of $0.79. Net sales were $2.69 billion, up 9.3% from 24Q2, due to the Sovos Brands acquisition, but 3.8% below my estimate of $2.79 billion. Organic net sales declined 1% YOY. The shortfall on revenues was offset by lower than anticipated operating expenses, including restructuring charges. The primary reason for the earnings shortfall vs. my estimate, therefore, was a higher than expected effective tax rate.
Management lowered fiscal 2025 guidance as a result of a slower than expected recovery in its snacking business. It will continue to invest in its snacking brands to defend and grow market share during this weaker consumer spending environment. According to management, 10 of 16 of leadership snacking brands held or increased share during the quarter. Management also reported that it has made substantial progress on the integration of recently acquired Sovos Brands and has accelerated cost savings initiatives.
With the lower than expected earnings, management has lowered its net sales growth guidance from a range of +9% to +11% by three percentage points (PP) to a range of +6% to +8%. Organic net sales are expected to be down 1% at the midpoint of the guidance range, down 2 PP from up 1% at the midpoint previously. Expected adjusted EBIT growth has been lowered by 6 PP to a range of +3% to +5%. Management’s guidance now calls for adjusted EPS of $2.95 to $3.05, down from $3.12 to $3.22 previously.
As a result of the change in guidance, I have lowered projections for fiscal 2025 and fiscal 2026. I now anticipate 2025 GAAP EPS of $2.37 (down from $2.49) and non-GAAP EPS of $3.00 (down from $3.17). For fiscal 2026, my projections now show GAAP EPS of $2.99 (down from $3.13) and non-GAAP EPS of $3.15 (down from $3.39).
Since my last report (12/4), Campbell’s stock has delivered a negative 8.7% total return, slightly better than the S&P 500’s 9.9% decline, but worse than the Dow Jones U.S. Food Products Index’s 3.8% price decline. Based upon the continued drop in CPB’s stock price, I am lowering my 12-month price target from $50 to $45. The price target equates to a one-year forward multiple of 15.0 times projected fiscal 2026 GAAP earnings of $2.99 and 13.8 times non-GAAP earnings of $3.25. (The non-GAAP multiple assumes a narrowing of CPB’s discount vs. peers, but to a level still below the peer group average of 16.0.) The revised target price represents a potential total return of 21.9%, including the stock’s 4.3% dividend yield. Accordingly, I am maintaining my performance rating of “1” (Buy).
This is a summary of Lark Research’s report on The Campbell’s Company (CPB). To obtain a copy of the report, please reach out to me, using the contact information provided below.
June 20, 2025
Stephen P. Percoco
Lark Research
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© 2015-2025 by Stephen P. Percoco, Lark Research. All rights reserved.
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