Evercore ISI sets Campbell Soup stock In Line with $48 target

On Wednesday, Evercore ISI initiated coverage on Campbell Soup (NYSE:CPB) Company (NASDAQ:CPB) with an "In Line" rating and a price target of $48.00. Currently trading at $40.33, the stock appears fairly valued according to InvestingPro analysis. Notable for its strong dividend history, Campbell has maintained dividend payments for 55 consecutive years, currently offering a 3.87% yield. The firm noted that Campbell’s consolidated organic sales were below consensus, with operating profit aligning closely due to reduced corporate expenses. The company’s financial results for the second quarter of fiscal year 2025 showed earnings per share (EPS) at $0.74, an 8% decrease year-over-year, but slightly above Evercore ISI’s estimate of $0.73 and the consensus of $0.72. InvestingPro data reveals the company maintains a solid financial health score of 3.51 for profitability, though its overall health score stands at 2.46, rated as ’FAIR’.

Campbell Soup’s organic sales decreased by 2%, contrary to Evercore ISI’s expectation of flat sales and the consensus estimate. The Meals & Beverage (M&B) segment experienced a 1% drop in organic sales year-over-year, including a 1% increase in volume but a 2% decrease in net pricing. This was below the measured channel sales growth, excluding Rao’s, which stood at 1%. The Sovos acquisition significantly boosted the M&B segment’s sales growth, led by strong performance from Rao’s.

The Snacks segment saw a 3% decline in organic sales, with a 2% decrease in volume and a 1% drop in net pricing year-over-year, which was below the measured channel sales decline of 1.5%. Campbell’s gross margin fell by 100 basis points year-over-year due to commodity inflation, unfavorable net pricing, and product mix, which were only partly mitigated by supply chain savings and cost savings. Additionally, marketing and selling expenses rose by 18% year-over-year.

The operating margin in the Meals & Beverage segment decreased by 50 basis points to 17.3%, while the Snacks segment’s operating margin fell by 366 basis points to 11.3%, mainly due to an unfavorable mix and operational challenges in the fresh bakery business. These figures were below Evercore ISI’s expectations and the consensus for the Snacks segment. Campbell Soup aims to achieve a 10% organic growth target for fiscal year 2025, with Rao’s contributing significantly to this goal.

In other recent news, Campbell Soup Company reported mixed second-quarter results, with adjusted earnings of $0.74 per share slightly surpassing analyst estimates of $0.73. However, the company fell short on revenue, posting $2.68 billion against the $2.74 billion consensus forecast. Organic net sales decreased by 2% year-over-year, largely due to declines in the Snacks segment and lower net price realization. As a result, Campbell Soup has revised its fiscal 2025 outlook, now expecting organic sales to range from a 2% decline to flat, and adjusted earnings per share between $2.95 and $3.05, down from the previous guidance of $3.12 to $3.22.

Barclays (LON:BARC) has maintained an Underweight rating on Campbell Soup with a price target of $46, noting that market expectations were low prior to the earnings release. Meanwhile, JPMorgan has kept an Overweight rating with a $48 target, acknowledging the company’s proactive approach in addressing financial challenges under new CEO Mick Beekhuizen. Despite these efforts, the company does not foresee a return to organic sales growth until the fourth fiscal quarter of 2025. The ongoing struggles in the Snacks division and the revised guidance have sparked concerns among investors about Campbell Soup’s growth prospects in the current consumer environment.

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