Campbell's reported mixed earnings with net sales growth fueled by acquisitions, but faced margin pressure from increased costs.Iconic soup and snack food company Campbell's (CPB -2.33%) reported mixed fiscal 2025 second-quarter earnings on Wednesday, March 5. The highlight was a 9% rise in net sales to $2.68 billion, largely attributed to its acquisition of Sovos Brands. This acquisition offset some underlying challenges. The quarter exceeded expectations in terms of sales volume, and adjusted earnings per ...

Earnings Presentation Q2 Fiscal 2025 Rebecca Gardy Chief Investor Relations Officer Welcome Today's Agenda Mick Beekhuizen Chief Executive Officer Strategy and Business Update Carrie Anderson Chief Financial Officer Financial Results and Outlook 2 Forward-looking Statements Safe Harbor Regarding Forward-Looking Statements This presentation contains "forward-looking" statements within the meaning of the federal securities laws. These forward-looking statements reflect our current expectations regarding our f ...

Campbell Earnings Beat Expectations. Why the Stock Is Dropping. ...

Financial Performance - Net sales for the three months ended January 26, 2025, were $2,685 million, an increase of 9.3% compared to $2,456 million for the same period in 2024[9] - Net earnings attributable to The Campbell's Company for the three months ended January 26, 2025, were $173 million, a decrease of 14.8% from $203 million in the prior year[9] - The company reported a total comprehensive income of $170 million for the three months ended January 26, 2025, down from $186 million in the same period last year[11] - Net earnings for the six months ended January 26, 2025, were $391 million, a decrease from $437 million for the same period in 2024, representing a decline of approximately 10.5%[18] - Total net sales for the company reached $5.457 billion for the six months ended January 26, 2025, compared to $4.974 billion for the same period in 2024[56] - Net sales for Meals & Beverages increased by 22% to $3,385 million, primarily due to a 22-point benefit from the acquisition of Sovos Brands[151] - Total pre-tax costs for cost savings initiatives are estimated at $190 million, with expected annual savings of approximately $250 million by the end of 2028[172][174] Assets and Liabilities - Total assets increased to $15,910 million as of January 26, 2025, compared to $15,235 million as of July 28, 2024, reflecting a growth of 4.4%[14] - The company's long-term debt increased to $6,496 million as of January 26, 2025, compared to $5,761 million as of July 28, 2024, representing a rise of 12.7%[14] - Cash and cash equivalents rose significantly to $829 million as of January 26, 2025, compared to $108 million as of July 28, 2024[14] - Total liabilities at fair value decreased slightly to $116 million as of January 26, 2025, compared to $117 million on July 28, 2024, indicating a 0.85% decrease[95] Expenses - Research and development expenses remained stable at $25 million for both the three months ended January 26, 2025, and January 28, 2024[9] - Marketing and selling expenses increased to $256 million for the three months ended January 26, 2025, up from $217 million in the prior year, marking a rise of 18%[9] - Interest expense increased significantly to $88 million in 2025 from $46 million in 2024, primarily due to higher levels of debt[149] - The effective tax rate rose to 30.0% in 2025 from 25.1% in 2024, influenced by a $15 million deferred tax expense related to the sale of the noosa yoghurt business[150] Acquisitions and Divestitures - The company completed the acquisition of Sovos Brands, Inc. for a total consideration of $2.899 billion, with cash paid to shareholders amounting to $2.339 billion[31] - The acquisition contributed $313 million to net sales and a loss of $9 million to net earnings for the three-month period ended January 26, 2025[34] - The company sold its Pop Secret popcorn business for $70 million, recognizing a pre-tax loss of $25 million[36] - The noosa yoghurt business was sold for $188 million, with net sales of $39 million for the three-month period ended January 26, 2025[38] Shareholder Returns - Total dividends paid during the period amounted to $227 million, slightly up from $224 million in the previous year[18] - The company repurchased 1.134 million shares at a cost of $56 million during the six-month period ended January 26, 2025, compared to 707 thousand shares for $29 million in the same period of 2024[104] - Approximately $205 million remains available under the September 2024 share repurchase program as of January 26, 2025[104] Impairments and Charges - The company incurred restructuring charges of $5 million for the three months ended January 26, 2025, compared to $2 million in the same period last year[9] - The company reported impairment charges of $26 million and restructuring charges of $11 million for the current period, compared to no impairment charges and $4 million in restructuring charges in the prior year[18] - An impairment charge of $15 million was recognized on the Allied brands trademarks due to below-expectation sales performance, with a carrying value of $28 million as of January 26, 2025[47] Cash Flow - Net cash provided by operating activities increased to $737 million, compared to $684 million in the prior year, reflecting a growth of about 7.8%[18] - The net cash used in investing activities was $175 million, an improvement from $256 million in the same period last year[18] - Cash flows from operations increased to $737 million in 2025, up from $684 million in 2024, primarily due to higher cash earnings and changes in working capital[179] Future Outlook - The company anticipates continued supply chain productivity and benefits from cost savings initiatives to mitigate inflationary pressures in 2025[128] - The company expects approximately $135 million of the identified pre-tax costs to be cash expenditures, alongside an investment of approximately $215 million in capital expenditures[68] - The company plans to implement cost savings initiatives beginning in 2025, focusing on supply chain optimization and information technology infrastructure[64]

Financial Performance - Net sales increased 9% to $2.7 billion, while organic net sales decreased 2% to $2.4 billion[4] - Earnings Before Interest and Taxes (EBIT) were $327 million, with adjusted EBIT increasing 2% to $372 million[4] - Diluted Earnings Per Share (EPS) decreased 15% to $0.58, while adjusted EPS decreased 8% to $0.74[4] - Net earnings attributable to The Campbell's Company for the three months ended January 26, 2025, were $173 million, a decrease of 15% from $203 million in the same period last year[42] - Net earnings for the six months ended January 26, 2025, were $391 million, down from $437 million for the same period in 2024, representing a decrease of approximately 10.5%[47] - Adjusted net earnings attributable to The Campbell's Company for Q2 2025 were $222 million, an 8% decrease from $240 million in Q2 2024[62] Sales and Revenue - The company updated its full-year fiscal 2025 guidance, projecting net sales growth of approximately 6% to 8%[18] - For the six months ended January 26, 2025, net sales reached $5.457 billion, a 10% increase compared to $4.974 billion for the same period in the previous year[41] - The Meals & Beverages segment contributed $1.679 billion in sales for the three months ended January 26, 2025, up 21% from $1.382 billion year-over-year[42] - The Snacks segment experienced a 6% decline in sales, totaling $1.006 billion for the three months ended January 26, 2025, compared to $1.074 billion in the prior year[42] - Total net sales for the six months ended January 26, 2025, were $5,457 million, a decrease of 10% from $6,036 million in the same period in 2024[51] - The company expects total net sales for the fiscal year 2025 to be approximately $9,457 million, reflecting a decrease of 1.9% from the previous year[51] Expenses and Cost Management - Marketing and selling expenses increased 18% to $256 million, representing approximately 10% of net sales[9] - The cost savings program delivered approximately $65 million of savings, with expected full-year savings increased to $120 million[16] - Administrative expenses decreased by 13% to $165 million in Q2 fiscal 2025, down from $189 million in Q2 fiscal 2024[60] - Costs associated with cost savings and optimization initiatives amounted to $19 million in Q2 2025, down from $27 million in Q2 2024[62] Cash Flow and Assets - Cash flow from operations for the six months ended January 26, 2025, was $737 million, with $283 million returned to shareholders through dividends and share repurchases[4] - The company reported total assets of $15.910 billion as of January 26, 2025, compared to $12.106 billion a year earlier, reflecting a significant increase[45] - The company has a total cash and cash equivalents balance of $829 million as of January 26, 2025, compared to $169 million in the prior year[45] - The company reported net cash provided by operating activities of $737 million for the six months ended January 26, 2025, compared to $684 million for the same period in 2024, an increase of about 7.8%[47] - The company reported a net cash used in investing activities of $175 million for the six months ended January 26, 2025, compared to $256 million for the same period in 2024, a decrease of approximately 31.6%[47] Debt and Liabilities - Long-term debt increased to $6.496 billion as of January 26, 2025, up from $4.506 billion a year ago[45] - Long-term borrowings increased to $1,144 million in the six months ended January 26, 2025, compared to no long-term borrowings in the same period in 2024[47] Taxation - The effective tax rate was 30.0%, compared to 25.1% in the prior year[13] - The effective income tax rate increased to 30.0% in Q2 2025, up 490 basis points from 25.1% in Q2 2024[61] - In Q2 fiscal 2025, the company recorded a deferred tax expense of $15 million ($0.05 per share) related to the sale of the Noosa yoghurt business[59] Impairments and Charges - The company recognized impairment charges totaling $26 million in the second quarter of fiscal 2025, impacting earnings by $19 million after tax, or $0.06 per share[56] - The total aggregate impact related to cost savings and optimization initiatives was $60 million for the six months ended January 26, 2025, with an after-tax impact of $46 million, or $0.15 per share[54] - The total aggregate impact of charges associated with divestitures in the six-month period of fiscal 2025 was $25 million, or $0.11 per share[59] - Impairment charges for the first half of 2025 totaled $19 million, compared to no charges in the same period of 2024[62] Other Financial Metrics - Gross profit for Q2 fiscal 2025 was reported at $819 million, an increase of 6% compared to $776 million in Q2 fiscal 2024[60] - Adjusted gross profit margin decreased to 30.4% in Q2 fiscal 2025 from 31.4% in Q2 fiscal 2024, reflecting a decline of 100 basis points[60] - Adjusted earnings before interest and taxes for the first half of 2025 rose to $804 million, up 4% from $771 million in the same period of 2024[61] - The company recognized an actuarial loss of $2 million related to a postretirement plan in the six-month period of fiscal 2025[59] - In the six-month period of fiscal 2025, litigation expenses related to the Plum business totaled $2 million, impacting earnings by $0.01 per share[59] - The company recorded insurance recoveries of $1 million related to a cybersecurity incident in the six-month period of fiscal 2025[59]

Core Insights - Campbell's (CPB) is expected to report quarterly earnings of $0.73 per share, reflecting an 8.8% decline year-over-year, while revenues are forecasted to be $2.74 billion, indicating an 11.5% increase compared to the previous year [1] - Analysts have slightly revised the consensus EPS estimate upward by 0.1% over the past 30 days, suggesting a reappraisal of initial projections [1][2] Revenue and Earnings Estimates - 'Net Sales- Meals & Beverages' are projected to reach $1.71 billion, representing a year-over-year increase of 23.7% [4] - 'Net Sales- Snacks' are estimated at $1.03 billion, indicating a decline of 3.7% from the previous year [4] - 'Operating Earnings- Meals & Beverages' are expected to be $287.51 million, up from $247 million year-over-year [4] - 'Operating Earnings- Snacks' are forecasted to be $143.77 million, down from $161 million in the prior year [5] Market Performance - Over the past month, Campbell shares have gained 0.6%, contrasting with a decline of 2.4% in the Zacks S&P 500 composite [6] - Campbell holds a Zacks Rank 3 (Hold), indicating that its performance is likely to align with the overall market in the near term [6]

Core Viewpoint - Campbell's Company (CPB) is expected to report revenue growth in its second-quarter fiscal 2025 earnings, with a consensus estimate of $2.74 billion, reflecting an 11.7% increase year-over-year. However, earnings per share are projected to decline by 8.8% to 73 cents compared to the previous year [1]. Group 1: Revenue and Earnings Expectations - The Zacks Consensus Estimate for Campbell's revenues is $2.74 billion, indicating an 11.7% increase from the prior-year quarter [1]. - The earnings consensus has increased by a penny to 73 cents per share, but this represents an 8.8% decline from the year-ago quarter [1]. - Campbell's has a trailing four-quarter earnings surprise of 3.7% on average [1]. Group 2: Growth Drivers - The company benefits from consistent innovations, effective marketing, and improved share trends, focusing on execution and collaboration with retail partners [3]. - The Meals & Beverages division is expected to contribute to growth, with a projected 1.5% organic sales growth in the second quarter [3]. - Management anticipates sequential improvement in the fiscal second quarter, driven by strong holiday demand, enhanced consumer confidence, and normalized pricing [4]. Group 3: Challenges and Risks - A dynamic consumer environment with cautious spending habits and evolving preferences poses challenges, particularly affecting the Snacks division, which is expected to see a 1.7% decline in organic sales [5]. - Core inflation and ongoing supply-chain cost pressures are additional headwinds for the company [5]. - Despite these challenges, Campbell's is making progress with cost-saving efforts, which may provide some relief [5]. Group 4: Earnings Prediction - The model predicts an earnings beat for Campbell's, supported by a positive Earnings ESP of +2.62% and a Zacks Rank of 3 (Hold) [6].

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for Campbell's despite higher revenues, with the actual results being crucial for stock price movement [1][2]. Earnings Expectations - The earnings report is expected on March 5, 2025, with an anticipated EPS of $0.73, reflecting an 8.8% decrease year-over-year, while revenues are projected to be $2.74 billion, an increase of 11.7% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analysts' assessments [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model shows a positive Earnings ESP of +3.16% for Campbell, suggesting recent bullish sentiment among analysts [10]. Zacks Rank - Despite the positive Earnings ESP, Campbell currently holds a Zacks Rank of 4, complicating predictions of an earnings beat [11]. Historical Performance - In the last reported quarter, Campbell exceeded EPS expectations by 2.30%, having beaten consensus estimates in all of the last four quarters [12][13]. Market Reaction Factors - An earnings beat or miss alone may not dictate stock movement, as other factors can influence investor sentiment [14]. Investment Considerations - While Campbell may not be a strong candidate for an earnings beat, investors should consider additional factors before making investment decisions [16].

Core Insights - Campbell Soup Company has completed the sale of its Noosa yogurt business to Lakeview Farms, aligning with its strategy to focus on core business areas by divesting non-essential brands [1][2] - The sale is expected to be slightly dilutive to earnings per share by approximately $0.01 in fiscal 2025, but it is part of a broader effort to streamline operations and strengthen market position [2][6] - The acquisition of Sovos Brands in March 2024 has positively impacted Campbell's performance, particularly through the strong sales growth of Rao's, contributing to overall fiscal 2025 results [4] Financial Performance - Campbell experienced a 1% decline in organic net sales in the fiscal first quarter due to shifting consumer dynamics and cautious spending habits [5] - Rising supply-chain costs and the need for promotional investments have pressured margins, indicating challenges in maintaining profitability [5][6] - The company's shares have dropped 11.3% over the past three months, compared to a 4.7% decline in the industry [6] Strategic Focus - The company is committed to refining its portfolio through strategic acquisitions and divestitures, focusing on core strengths to adapt to changing consumer trends and economic factors [6] - The proactive approach in acquisitions and divestitures is aimed at enhancing market position and profitability, as demonstrated by the positive contributions from Sovos Brands [4][6]

Company Overview - The Campbell's Company, previously known as Campbell Soup, has rebranded to reflect its diverse portfolio of food and beverage products [1] - The product lineup includes well-known brands such as Campbell's, Goldfish, and Rao's [1] Investment Criteria - The company is of interest to investors who prioritize growth in revenue, earnings, and free cash flow [1] - It is considered favorable if the company has excellent growth prospects and favorable valuations [1] - Preference is given to companies with high free cash flow margins, dividend stocks, and generous share repurchase programs [1]