While Campbell’s Co. faces near-term challenges from shifting consumer preferences and potential tariff impacts, its strong brand portfolio, dividend income, and strategic initiatives provide a solid foundation for long-term investors. The recent acquisition of premium brands like Rao’s enhances the company’s growth profile, while cost savings programs should help protect margins.
Investors should monitor developments regarding U.S. tariff policies, which could significantly impact the company’s cost structure, though the timing and scope remain uncertain. The market’s current valuation appears to reflect these concerns while potentially undervaluing the long-term benefits of recent strategic moves.
Meanwhile the stock trades at 11.9 times the company’s forward earnings forecast.
CAMPBELL’S CO. (Nasdaq symbol CPB; www.thecampbellscompany.com) recently changed its name from Campbell Soup Co. to reflect its broader array of products, including soups, sauces and snack foods. It also transferred its stock listing from the New York Stock Exchange to Nasdaq (the shares continue to trade under the “CPB” symbol).
In March 2024, the company completed its $2.9 billion acquisition of Sovos Brands Inc. (Nasdaq symbol SOVO), the maker of Rao’s pasta sauces.
As a result of that purchase, Campbell’s sales in its fiscal 2025 second quarter, ended January 26, 2025, rose 9.3%, to $2.69 billion from $2.46 billion a year earlier. That missed the $2.74 billion consensus forecast.
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If you exclude businesses that Campbell’s bought and sold, sales fell 1.8% in the latest quarter. That’s due to lower selling prices (down 2%) and flat volumes.
If you factor out costs related to the Sovos purchase and other unusual items, the company’s earnings declined 7.5%, to $0.74 a share (or a total of $222 million) from $0.80 a share (or $240 million). Even so, that also beat the consensus estimate of $0.72.
Value Stocks: Integration progresses with cost savings ahead of schedule
Campbell’s realized $65 million in savings in the latest quarter under a new plan to improve its efficiency following the Sovos purchase. It expects annual cost savings will total $250 million by the end of fiscal 2028.
Due to weaker snack food demand, the company now expects sales in fiscal 2025, excluding the Sovos purchase, to decline about 1% compared to its earlier forecast of 1% growth. Note—these estimates exclude any potential impact from tariffs.
As well, higher interest costs will probably cut its earnings for 2025 to between $2.95 and $3.05 a share, from its previous prediction of $3.12 to $3.22 a share. The stock trades at 11.9 times the midpoint of that updated range. That’s a low multiple considering the company’s strong brands and market share.
Despite the lower earnings outlook, Campbell’s remains confident in its long-term prospects. In January 2025, it raised your quarterly dividend by 5.4%, to $0.39 a share from $0.37. The new annual rate of $1.56 yields 4.1%.
Recommendation in Wall Street Stock Forecaster: Campbell’s Co. is a buy.
