Why Campbell Soup's Earnings Might Disappoint in Fiscal 1Q18

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Part 3
Why Campbell Soup's Earnings Might Disappoint in Fiscal 1Q18 PART 3 OF 5

Why Campbell Soup’s Sales Could Be Disappointing

What analysts expect

Campbell Soup (CPB) has been disappointing on sales and has missed analysts’ consensus estimates in the past three quarters. Moreover, the company’s sales continue to slide as lower demand for packaged foods in the US (SPY) remains a drag. As for fiscal 1Q18, analysts expect Campbell Soup’s sales to be $2.2 billion, down 1.7% on a YoY (year-over-year) basis. Soft demand for its soups and beverages could hurt its top-line growth.

Why Campbell Soup&#8217;s Sales Could Be Disappointing

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In comparison, analysts estimate that J.M. Smucker (SJM) will report a 1.0% decline in its fiscal 2Q18 sales, reflecting weakness in its coffee segment. On the contrary, Mondelēz’s (MDLZ) 3Q17 sales improved 2.1%, driven by increased volumes and pricing. Meanwhile, Hershey (HSY) marked a 1.5% improvement in its 3Q17 sales. Also, Kellogg’s (K) top line improved marginally during the last reported quarter, thanks to the Parati acquisition and favorable currency movement. Mondelēz and Kellogg’s top line returned to growth after seeing declines in the past several quarters.

However, General Mills (GIS) and Conagra Brands (CAG) continue to report lower sales on account of an industry-wide slowdown and portfolio restructuring.

Outlook remains bleak

Campbell Soup expects its top line to remain flat or fall 2% in fiscal 2018. Segment-wise, Campbell Soup’s Americas Simple Meals and Beverages remains challenged and continues to report lower soup sales on account of retailer destocking inventories due to the sluggish consumer demand. Besides, sales of its V8 beverages remain weak. Meanwhile, an anticipated decline in promotional spending could remain a drag.

However, sales in the company’s Fresh and Global Biscuits and Snacks segment are projected to improve on a YoY basis and are likely to support the top-line growth.


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