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Could Campbell Soup’s Earnings Decline in Fiscal 2018?

Amit Singh - Author
By

Aug. 18 2020, Updated 4:40 a.m. ET

What could affect CPB’s EPS?

Campbell Soup (CPB) has missed analysts’ EPS (earnings per share) expectations in the past three quarters. Volume deleverage, higher input costs, and increased competition have taken a toll on the company’s profitability.

During the last reported quarter, Campbell Soup’s EPS declined 8% as lower volumes and adverse mix impacted the company’s bottom line. Increased supply-chain expenses, low carrot yields, and input cost inflation further pressured margins and its EPS.

Most of the packaged food manufacturers in the US (SPY) have reported improved bottom-line performance. This improvement occurred despite volumes deleverage and pressure on margins from the higher raw material, logistics, and packaging costs.

Kellogg (K), Mondelēz (MDLZ), Conagra (CAG), and Hershey (HSY) have posted improved EPS, thanks to the higher cost and productivity savings.

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Headwinds to EPS likely to persist

Campbell Soup (CPB) management lowered its profit guidance as margin headwinds could persist in the coming quarters. The company expects its gross margin to remain flat in fiscal 2018, which is lower than what management had earlier estimated.

Campbell Soup now projects its EBIT[1. earnings before interest and tax] to mark a decline of 2%–4% in fiscal 2018. Previously, its management forecast its EBIT to rise 1% or fall 1%. Low carrot yields, input cost inflation, and an anticipated rise in supply-chain expenses are expected to hurt the company’s margins and its EPS. Lower volumes in soups could further pressure the company’s profitability.

Given the pressure on its margins, Campbell Soup lowered its fiscal 2018 EPS guidance. The company now projects a 1%–3% decline in its bottom line.

The company previously expected its EPS to remain flat or rise 2% in fiscal 2018. Analysts project a 2.6% decrease in Campbell Soup’s bottom line for fiscal 2018.

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