Lower Taxes Drove Campbell’s Fiscal 2Q18 Earnings Beat



Fiscal 2Q18 EPS surpasses expectations

On February 16, 2018, the Campbell Soup Company (CPB) reported better-than-expected fiscal 2Q18 EPS (earnings per share) for the period that ended on January 28, 2018.

Campbell Soup’s adjusted EPS of $1.00 handily exceeded analysts’ estimate of $0.91 and marked a YoY (year-over-year) rise of 9.9% thanks to the recently enacted tax reform bill. However, inflation in commodity prices and higher freight costs remained a drag.

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Here’s what impacted CPB’s fiscal 2Q18 EPS

Campbell Soup’s fiscal 2Q18 EPS benefited from a decline in the adjusted tax rate owing to the enactment of the Tax Cuts and Jobs Act. Meanwhile, a lower outstanding share count further boosted its bottom line growth rate. Incremental savings from supply chain productivity and a fall in marketing and selling expenses also remained positives.

However, a continued decline in volumes, an unfavorable mix, inflation in commodity prices, and higher manufacturing, transportation, and logistics costs remained a drag on EPS.

Weak volumes, higher manufacturing and logistics costs, and input cost inflation also adversely affected the EPS of other major packaged food manufacturing companies in the United States. The Kraft Heinz Company (KHC) and the Hershey Company (HSY) saw YoY falls in their EPS during their last reported quarters. On the contrary, earnings for the J. M. Smucker Company (SJM), Mondelēz (MDLZ), and the Kellogg Company (K) showed YoY growth thanks to cost and productivity savings, share repurchases, and lower tax rates.

Guidance raised on lower taxes

Campbell’s now expects its fiscal 2018 EPS to mark a YoY rise of 2%–4%, up from its earlier guidance of a 1%–3% fall. This revised guidance reflects a benefit of $0.25 per share from a lower tax rate. Productivity and cost-saving initiatives should further support its profitability growth.

However, lower volumes in soups and V8 beverages, inflation in commodity prices, and higher transportation and logistics costs are likely to hurt its bottom line growth rate.


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