Campbell's Q2 Earnings Report: Sales Lag Despite Acquisition Growth

The Campbell’s Company (NASDAQ:CPB), known for its canned soup products, experienced a dip in its stock prices in premarket trading.

In the recently concluded second quarter, Campbell's reported a sales increase of 9% to $2.685 billion. However, this figure fell short of analysts' expectations, who had projected sales of $2.74 billion.

This growth was largely attributable to the company's acquisition of Sovos Brands. Yet, when adjusted for organic sales, the company experienced a 2% decline, with sales totaling $2.4 billion. This decrease can be attributed to price adjustments with minimal change in volume or product mix.

Within the various segments, the Meals & Beverages division saw a notable increase of 21% in sales, benefiting from the recent acquisition. Conversely, the Snacks division reported a 6% decline in sales during this quarter.

Despite the increase in sales, Campbell’s gross margin saw a contraction of 110 basis points year-over-year, coming in at 30.5%. The adjusted earnings before interest and taxes (EBIT) rose by 2% year-over-year, reaching $372 million.

In terms of earnings per share, Campbell's adjusted EPS came in at $0.74, surpassing the analyst consensus estimate of $0.72.

As of January 26, 2025, the company held $829 million in cash and equivalents. The operating cash flow over the first six months totaled $737 million. Year-to-date, the company has also returned $227 million to shareholders through cash dividends and repurchased approximately $56 million in common stock.

At the end of the second quarter, Campbell's had around $205 million remaining available under its anti-dilutive stock repurchase program, along with $301 million left under its strategic repurchase initiative launched in September 2021.

The company has reported about $65 million in cost savings as part of its $250 million cost savings program initiated in September 2024.

“Considering the lag in some of our snack categories, the expected sequential increase in revenue did not occur during the quarter. Therefore, we now anticipate a more conservative outlook for the second half of the fiscal year, prompting us to revise our overall guidance,” remarked President and CEO Mick Beekhuizen.

Fiscal Year 2025 Outlook

For the fiscal year 2025, Campbell is projecting a net sales growth of 6% to 8%, a revision from the previous estimate of 9% to 11%. The adjusted EBIT growth outlook has also been adjusted down to 3% to 5%, down from the earlier projection of 9% to 11%.

Furthermore, the company expects adjusted EPS to fall between $2.95 – $3.05, a decrease from the prior range of $3.12 – $3.22, and is slightly below the consensus estimate of $3.13.

It is important to note that this guidance does not take into account any potential effects from recent and future import tariffs imposed by the U.S. government or any reciprocal actions that may be taken by other nations.

Stock Market Reaction

Following the earnings report, CPB shares dropped by 6.74%, trading at $37.62 during premarket hours on the Wednesday after the announcement.

Campbell, Earnings, Sales