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

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Why Campbell Soup's Earnings Might Disappoint in Fiscal 1Q18 PART 2 OF 5

Why Campbell Soup’s Fiscal 1Q18 Earnings Could Fall

Consensus estimate

Campbell Soup (CPB) is expected to announce its fiscal 1Q18 results on Tuesday, November 21, 2017. Wall Street expects Campbell Soup to report earnings of $0.97 per share, reflecting a YoY (year-over-year) decline of 3.0%. Analysts expect volume deleverage and increased input costs to take a toll on the company’s EPS (earnings per share) in fiscal 1Q18. Campbell Soup has missed analysts’ EPS estimate in the past two quarters.

Why Campbell Soup’s Fiscal 1Q18 Earnings Could Fall

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In comparison, analysts also expect J.M. Smucker (SJM) to see a YoY decline in its fiscal 2Q18 EPS, reflecting lower profitability in its coffee segment. Meanwhile, other packaged food manufacturers reported improved bottom-line results.

For instance, the Kellogg Company’s (K) 3Q17 EPS rose 9.4% driven by higher cost savings. Mondelēz’s (MDLZ3Q17 EPS rose 14.0%, reflecting higher volumes and a decline in overhead costs, while Hershey’s (HSY) 3Q17 earnings rose 3.1% on the back of improved sales. Also, Conagra Brands’ (CAG) bottom line rose as higher costs savings offset the decline in volumes.

What could hurt Campbell Soup’s EPS?

Campbell Soup’s fiscal 1Q18 EPS is likely to take a hit from lower volumes. The company is witnessing lower soup sales in the US (SPY). Also, the demand for its V8 beverages remains soft. Plus, higher input costs and increased interest expenses could further put pressure on the company’s profitability.

However, benefits from supply-chain productivity savings and lower share count could cushion the EPS. Campbell Soup’s management estimates its fiscal 2018 bottom line to remain flat or rise by as much as 2.0%.

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