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Campbell Soup’s Earnings Might Continue to Decline

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May. 29 2019, Published 1:19 p.m. ET

Analysts’ estimate

Analysts expect Campbell Soup (CPB) to post an adjusted EPS of $0.47 in the third quarter, which implies a YoY (year-over-year) decline of 32.9%. Campbell Soup’s bottom line decreased in the past four quarters, which reflected lower organic sales, weak margins, and higher interest expenses. Despite the decline, Campbell Soup beat analysts’ EPS estimates in the past six quarters, which is encouraging. Lower marketing and selling expenses helped the company beat analysts’ expectation during the last reported quarter.

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Campbell Soup’s third-quarter EPS

Analysts’ third-quarter projection indicates that the rate of decline in Campbell Soup’s EPS is expected to increase sequentially. A drop in organic sales is expected to hurt the company’s third-quarter earnings. The company’s profit margins are expected to decline, which reflects an unfavorable mix, input cost inflation, promotional spending, and higher supply-chain costs.

Soft organic sales and lower profit margins are expected to drag Campbell Soup’s earnings down. A rise in the interest expenses due to funding the company’s acquisitions and the higher effective tax rate could suppress the EPS.

Besides Campbell Soup, General Mills (GIS), Kellogg (K), J.M. Smucker (SJM), and Conagra Brands’ (CAG) bottom lines are taking a hit from higher input and supply chain costs. Increased interest expenses are taking a toll on their profitability.

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