Campbell Soup Rises as Q1 Beat Eases Investor Concerns
Shares gain despite a significant year-over-year drop in adjusted earnings and a reaffirmed forecast that signals persistent headwinds for the food giant.
Campbell Soup Co. (NYSE: CPB) shares gained in early trading Tuesday after the company reported first-quarter earnings that surpassed analyst expectations, providing a dose of relief to investors despite underlying signs of weakness, including a significant drop in year-over-year profitability.
The food and beverage company's stock jumped as much as 2.9% in pre-market trading after it posted an adjusted earnings per share of $0.77, comfortably beating the consensus estimate of $0.73. Net sales for the quarter came in at $2.7 billion, also ahead of the $2.66 billion analysts had projected. The market's positive reaction focused on this headline beat, choosing to look past more challenging metrics lurking beneath the surface.
While the quarterly performance topped estimates, it also represented a marked decline from the previous year. The adjusted EPS of $0.77 was down 13% from the $0.89 reported in the same quarter of fiscal 2025. Furthermore, organic net sales decreased by 1%, a decline the company attributed to lower volumes, signaling that consumer demand remains soft.
In a move that appeared to reassure Wall Street of stability, Campbell's reaffirmed its full-year guidance for fiscal 2026. The company continues to project reported net sales to be in a range of down 2% to flat, with organic net sales performance between a 1% decline and a 1% gain. However, this guidance still projects a challenging year, with adjusted EPS for the full year expected to be between $2.40 and $2.55, which would represent a steep decline from prior levels.
CEO Mick Beekhuizen noted that the first-quarter performance was in line with the company's expectations, reflecting "sharpened in-market execution in a dynamic operating environment." In a statement, Beekhuizen added that consumers "continue to be intentional in their shopping behaviors," with at-home cooking trends benefiting the company's core Meals & Beverages portfolio.
The company's two main divisions showed divergent paths. The Meals & Beverages segment, which includes its iconic soups, saw sales hold relatively steady. The Snacks division, however, experienced softness, a trend affecting many packaged food companies as consumers pull back on discretionary spending.
Seeking to bolster its growth profile, Campbell's also announced a strategic investment, acquiring a 49% interest in La Regina, the maker of Rao's tomato-based pasta sauces, for $286 million. This move deepens an existing partnership and is aimed at fueling growth for the popular premium sauce brand.
Despite the pre-market optimism, Campbell's faces a difficult operating environment. With a market capitalization of around $8.8 billion, the company is navigating shifting consumer habits and persistent cost inflation. The consensus rating from Wall Street analysts remains a cautious 'Hold,' with an average price target of $33.84, suggesting limited upside from its current levels.
Investors on Tuesday seemed content to focus on the short-term win of an earnings beat, but the company's own forecast suggests the path forward remains challenging as it contends with sluggish consumer demand and seeks to revitalize its portfolio.