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On Thursday, Evercore ISI analyst David Palmer adjusted the price target on Campbell Soup (NASDAQ:CPB) shares, reducing it to $46.00 from the previous $48.00. Currently trading at $39.18, near its 52-week low of $36.92, the stock has seen a challenging year with a -23.19% return over the past six months. Despite the change in price target, the firm maintained an In Line rating on the stock. Palmer’s analysis highlighted contrasting trends within the company’s product segments, noting a peculiar mix of weakness in the snack division and unexpected strength in broth sales. According to InvestingPro, six analysts have recently revised their earnings estimates downward for the upcoming period.
The analyst’s report pointed out that the snack segment, which accounts for 36% of Campbell’s EBIT, continues to face sales and operating profit margin challenges. Despite these headwinds, the company maintains a solid gross profit margin of 31.12% and has demonstrated consistent shareholder returns with 55 consecutive years of dividend payments, currently yielding 3.98%. Conversely, the broth category, representing approximately 8% of the company’s sales, has seen a consumption increase of 12% over the last 12 weeks. Palmer expressed some skepticism about the sustainability of the high-margin broth sales growth, attributing it to factors such as weather and a slow recovery from previous supply chain issues affecting private labels.
Palmer also indicated a reduction in the FY25 EPS estimate by around 4% due to the ongoing issues in the snack segment. He suggested that while the strength in broth sales is as surprising as the snack segment’s difficulties, there is an expectation that snack sales trends will improve over time. The report mentioned that improvements are anticipated following changes in promotion and price package strategies.
The analyst stated that the second half of the fiscal year would be a critical period for observing any improvements in the snack trends. Additionally, there is an expectation of some reacceleration in the growth of Rao’s, which makes up 9% of Campbell Soup’s sales. The company’s performance in these areas will be closely monitored for any signs of positive change.
In other recent news, Campbell Soup Company (NYSE:CPB) reported mixed results for the second quarter of fiscal year 2025, with adjusted earnings per share (EPS) slightly exceeding expectations at $0.74, compared to the forecast of $0.73. However, the company faced a revenue shortfall, reporting $2.68 billion in revenue against a projected $2.74 billion. This revenue miss has led Campbell Soup to revise its full-year guidance, now anticipating organic sales to range from a 2% decline to flat growth. The company also increased its cost savings target for the year to $120 million.
Analysts have responded with various adjustments to their ratings and price targets for Campbell Soup. Citi analyst Thomas Palmer lowered the price target to $37, maintaining a Sell rating, citing concerns over declining demand in the Snacks category. JPMorgan downgraded the stock from Overweight to Neutral, also reducing the price target to $37, due to reassessed growth prospects. Jefferies cut the price target to $40, holding a neutral position, while Stifel maintained a Hold rating with a $40 target, following the company’s earnings report.
These recent developments reflect ongoing challenges for Campbell Soup, particularly in its Snacks segment, where operational profit and margins have underperformed expectations. Investors are closely watching the company’s efforts to stabilize this segment and improve overall financial performance.
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