The Campbell’s Company (CPB) 26Q3 Update

CPB reported 26Q3 diluted GAAP EPS of $0.41, vs. last year’s $0.22.  YOY, net sales declined 4.4% to $2.37 billion, with comparable percentage declines in Meals & Beverages (MB) and Snacks.  Segment earnings fell 22%, due to the drop in sales and a sharp decline in gross profit margin from cost inflation and other factors.  That decline was more than offset, however, by the non-repeat of a $150 million impairment charge from 25Q3.  Thus, GAAP EBIT increased 48.4% to $239 million.  Non-GAAP earnings fell from $0.74 to $0.50, but exceeded the consensus estimate of $0.48.  

The results were mostly in line with management’s expectations.  For more than a year now, the company has been focused on improving its performance to return to growth.  While the drop in net sales is a concern, management believes that the trend favoring cooking at home is durable and plays to Campbell’s strength.  It also sees progress in its initiatives to turn sales around in Snacks, emphasizing core strengths, such as Goldfish crackers.

The MB franchise certainly seems durable, but Rao’s is a likely headwind because Campbell’s paid too much for the business.  Its acquisition of Italy’s La Regina, which sources Rao’s distinctive San Marzano tomatoes and produces the sauce, is a good strategic move that will protect the franchise. It should also help support margins next year.  Snacking remains a concern, as the company has already written down the value of two of its leadership brands and reports that the carrying values of most of the remaining brands are within 10% of a write-down.  If the consumer comes under greater pressure, snacks are an obvious place for them to cut spending.  Alternatively, if the turnaround does not take hold, Campbell’s could become an acquisition target (providing that the Dorrance family is willing to sell).

Despite my concerns, the company can deliver improved performance over the next year or two, as long as the U.S. economy avoids a recession.  Besides the modest boost from La Regina, its cost savings initiative should help support profitability next year and beyond.  The company is reviving part of its old playbook on product innovation that has failed in the past, providing only a short-term sales boost (until the novelty for consumers wears off).  Longer-term, Campbell’s must reduce its high adjusted EBITDA leverage ratio of 4.0 times back down to around 3.0 times to preserve its credit ratings.  Its common stock dividend of $1.64 is therefore at risk, as reflected in its 7.1% yield.

Management reaffirmed its fiscal 2026 adjusted EPS guidance of $2.15 to $2.25.  My projections anticipate 2026 GAAP EPS of $1.91 and non-GAAP EPS of $2.20.  For 2027, I anticipate net sales growth of 1.2%, GAAP EPS of $2.06 and non-GAAP EPS of $2.18, better than the 2027 Street estimate of $2.00.

Campbell’s stock has fallen 16.9% YTD, worse than the gains of 14.5% in the S&P 500 and 14.8% in the DJ U.S. Food Products Index.  Its stock chart, however, shows a clear bottoming process with a gradual but steady uptrend since May.  Based upon the share price decline, I am resetting my 6-12-month price target to $25.  The revised price target equates to one-year forward multiples of 12.0 times projected 2027 GAAP EPS of $2.06 and 11.5 times non-GAAP EPS of $2.18.  (By comparison, the average peer group multiple for 2027 is 13.4 times projected non-GAAP EPS.)  The revised price target represents a potential total return of 15%, including the 7.1% dividend yield.  Thus, I have reduced my performance rating to “2” (Outperform).  At the same time, given the company’s high leverage and the uncertainty of its turnaround, I have lowered my safety rating from C to C-.

This is a summary of my recent update report on The Campbell’s Company (CPB). For a limited time, I am offering access to the full report at no charge. You can get the full report here.

August 17, 2026 (Report published on August 17, 2026.)

Stephen P. Percoco
Lark Research
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© 2015-2026 by Stephen P. Percoco, Lark Research.   All rights reserved.

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