The Campbell's Company (NASDAQ: CPB) enters earnings grappling with evolving consumer preferences and a cautious outlook from Wall Street that has contributed to the stock losing 19% since the start of the year.
The earnings report for the quarter ending April 30, 2025, slated for release this morning before the opening bell could be a key moment, potentially validating or undermining the strategic direction the company has charted.
The headline figure that analysts are expecting include an EPS of $0.66, a 13.33% decrease compared to the same quarter last year, is concerning. While Campbell's has a history of surpassing earnings expectations, a consistent trend of declining earnings would undoubtedly put further pressure on the stock.
Revenue for the quarter is expected to grow to $2.43 billion (+2.56%) from the $2.37 billion reported during the same quarter YoY.
In a bid to reverse the declining trend, Campbell's management, recognizing the need to adapt to changing consumer tastes, unveiled a significant shift in strategy during its Investor Day back in September 2024. The company is consciously moving away from its traditional reliance on soup, instead prioritizing high-growth brands such as Rao's, Goldfish, and Pacific. This realignment represents a calculated bet on segments with greater growth potential, aiming to rejuvenate the product pipeline and drive future revenue. This strategic pivot also includes identifying new cost-saving opportunities, designed to enhance cash flow and provide resources for reinvestment in the business. The success of this strategic shift will be paramount in determining Campbell’s long-term viability.
The market's reaction to this strategic overhaul has been mixed. While the long-term potential of focusing on high-growth brands is undeniable, the transition period inevitably presents challenges. The stock's performance over the past year reflects this uncertainty.
Furthermore, the company's decision to transfer its stock exchange listing from the NYSE to the Nasdaq Global Select Market in August 2024, while intended to provide index inclusion opportunities and cost savings, adds another layer of complexity. While the ticker symbol “CPB” remained the same, the move itself indicates a willingness to embrace change and adapt to the evolving market landscape.
Analysts have not been quite so sure about the firm's outlook. Back in March, Wells Fargo's revised the firm's price target on CPB from $43.00 to $40.00, a move that underscores the growing skepticism surrounding the company's near-term prospects. Other revisions in recent weeks have all been to the downside.
| Date | Analyst Adjustment |
|---|---|
| 05/23 | Piper Sandler have lowered the firm's price target on Campbell's from $45 to $42 and also keeps an “Overweight” rating on the shares. |
| 05/21 | BofA have also lowered the firm's price target on Campbell's from $41 to $37 and maintain an “Underperform” rating on the shares. |
| 05/19 | Citi analyst have lowered the firm's price target on Campbell's from $37 to $33 and their rating remains a “Sell” rating on the shares. |
The upcoming earnings report will be a critical test, providing valuable insights into the effectiveness of Campbell's new direction and its ability to deliver sustainable growth in the long term.
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