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On Thursday, TD Cowen adjusted its outlook on Campbell Soup (NASDAQ:CPB), reducing the price target from $44.00 to $36.00 while maintaining a Hold rating on the shares. Currently trading at $39.18, the stock sits near its 52-week low of $36.92, with InvestingPro data showing 6 analysts revising their earnings estimates downward for the upcoming period. The decision follows Campbell’s announcement of disappointing organic growth in the second quarter, with profits meeting expectations but a downgrade in the company’s guidance for fiscal year 2025. Campbell now anticipates organic growth to range from a decrease of 2% to flat, with an expected 3% drop in earnings per share (EPS) at the midpoint of the forecast.
The revised guidance by Campbell Soup reflects a less optimistic view of the company’s Snacks segment, which has been facing increasing competition and the impact of GLP-1 proliferation. Despite these challenges, the company maintains its position as a reliable dividend payer, having maintained dividend payments for 55 consecutive years, with a current yield of 3.98%. TD Cowen has accordingly adjusted its forecast for fiscal year 2026, projecting a modest 1% organic growth and a 4% decline in EPS. This includes the potential impact of US/Canada tariffs, which could present an additional 2% downside to EPS in FY26 if enacted.
Campbell’s lowered expectations for FY25 and the potential challenges ahead have led TD Cowen to reassess the investment case for the company’s stock. While the company achieved revenue growth of 9.15% over the last twelve months, reaching $10.12 billion, the firm noted that the competitive environment and the growth of GLP-1 are significant obstacles for the Snacks division, while also pointing out a slowdown in the growth rate of Rao’s, Campbell’s premium pasta sauce brand. For deeper insights into Campbell’s financial health and future prospects, InvestingPro subscribers can access comprehensive analysis and additional ProTips in our detailed Research Report. TD Cowen’s revised estimates take into account a 2% headwind from the absence of a 53rd week in the fiscal calendar, which had previously benefited the company’s financials.
The analyst at TD Cowen highlighted the risks that Campbell Soup faces, including the possibility of new tariffs on steel and soup imports into Canada, which are not currently factored into their model. With a P/E ratio of 20.74 and an Altman Z-Score of 3.84 indicating financial stability, investors seeking detailed risk analysis and comprehensive valuation metrics can find extensive data through InvestingPro’s advanced tools and research reports. If these tariffs are implemented, they could lead to an additional 2% risk to Campbell’s EPS. The updated analysis suggests a cautious stance on the company’s future performance and valuation in light of these headwinds and market pressures.
In other recent news, Campbell Soup has faced several adjustments in its financial outlook and analyst ratings following its second-quarter performance. The company reported challenges in its Snacks division, leading to a reduction in its full-year guidance. Analysts from various firms have responded by lowering their price targets: RBC Capital Markets adjusted its target to $44, Evercore ISI to $46, Citi to $37, JPMorgan to $37, and Jefferies to $40. RBC and Evercore maintained a Sector Perform and In Line rating, respectively, while Citi kept a Sell rating. JPMorgan downgraded Campbell Soup from Overweight to Neutral, citing a reassessment of growth prospects. Jefferies retained a Hold rating, highlighting underperformance in organic growth and Snacks margin. Analysts have noted mixed performance across different product segments, with particular concerns about the sustainability of broth sales growth and the underperformance in Snacks. Campbell Soup’s management has revised its fiscal 2025 guidance downward, reflecting ongoing challenges and the need for strategic adjustments.
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