Campbell Soup: Will Q2 Hurt Its Stock?



Base business remains pressured  

Campbell Soup (CPB) is scheduled to announce its second-quarter results on February 27. We expect Campbell Soup’s top line to record strong double-digit growth due to its recent acquisitions including Snyder’s-Lance and Pacific Foods. However, the company’s organic sales could remain low, which would reflect lower volumes in US soups. More competitive activity and increased promotional spending are expected to remain a drag on soup sales.

We expect Campbell Soup’s adjusted gross margin to remain weak and contract on a YoY (year-over-year) basis, which reflects lower organic volumes and higher input and distribution costs.

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Soft organic sales and lower margins are expected to hurt Campbell Soup’s second-quarter adjusted EPS, which will likely fall on a YoY basis. Higher interest expenses, driven by higher debt related to funding the company’s recent acquisitions, are expected to drag down the earnings. The lower effective tax rate is expected to support the company’s second-quarter EPS.

Cost headwinds and higher interest expenses are also expected to remain a drag on other major food stocks’ bottom lines including General Mills (GIS) and J.M. Smucker (SJM).

Analysts’ estimate

Analysts expect Campbell Soup to report net sales of $2.7 billion, which implies 22.9% growth YoY, due to its recent acquisitions. Analysts expect Campbell Soup to post an adjusted EPS of $0.70, which indicates a decline of ~30% YoY.


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