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Campbell Soup

Campbell Soup, a processed food and snack company, reported lower-than-expected sales in the fiscal second quarter and expects it to decline further in full-year fiscal 2021 as reopening of restaurants amid easing COVID-19 pandemic and vaccine rollouts could lower demand for packaged foods, sending its shares down over 2% on Wednesday.

Camden County, New Jersey-based soups and snacks maker forecasts full-year fiscal 2021 sales to fall 3.5% to 2.5%. The company forecasts adjusted annual earnings in the range of $3.03 and $3.11 per share.

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Campbell Soup said its sales increased more than 5% to $2.28 billion, missing the Wall Street consensus estimates of $2.30 billion. On the other hand, adjusted EPS came in at $0.84 per share, slightly above the market expectations of $0.83 per share.

Campbell Soup shares, which fell around 2% in 2020, traded 2.36% lower at $45.86 on Wednesday.

Campbell Soup Stock Price Forecast

Five analysts who offered stock ratings for Campbell Soup in the last three months forecast the average price in 12 months of $52.00 with a high forecast of $59.00 and a low forecast of $48.00.

The average price target represents a 12.17% increase from the last price of $46.36. Of those five analysts, two rated “Buy”, two rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $49 with a high of $69 under a bull scenario and $30 under the worst-case scenario. The firm gave an “Equal-weight” rating on the packaged food company’s stock.

“We are Equal-weight CPB as its midterm outlook is supported by elevated packaged food demand, but remain cautious on CPB’s long-term growth prospects due to its exposure to structurally challenged categories, partly offset by stronger LT growth in Snacks,” said Pamela Kaufman, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Deutsche Bank lowered their price objective on Campbell Soup to $50 from $52 and set a “hold” rating. Jefferies Financial Group lowered their price objective to $54 from $58 and set a “buy” rating. Credit Suisse Group lowered their price objective to $49 from $55 and set a “neutral” rating.

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Analyst Comments

“High exposure to secularly challenged soup category: Shelf-stable soup (26.5% of sales) faces headwinds given shifts in preferences toward better-for-you and fresh foods, competition from private label, and pricing pressure. Snacking brands are well-positioned, but face competitive pressures: Milano, Goldfish, Farmhouse, and Snyder’s-Lance have strong brand equity, but face high competition from PEP and MDLZ,” Morgan Stanley’s Kaufman added.

“Significant organizational changes over last two years refocused the company and show promise: Divesting non-core businesses and new leadership refreshes the company’s strategic plan, allowing the company to focus on its key segments and geographies.”

Upside and Downside Risks

Risks to Upside: Soup volumes recover; new innovation translates to topline growth. Strategic advertising/marketing resonates with consumers.  CPB increases share in cookies/crackers -highlighted by Morgan Stanley.

Risks to Downside: Unable to improve soup growth; negative consumer perceptions continue. PEP and MDLZ present greater headwinds in snacking categories. Pepperidge Farm sales weaken, dragging snacking growth. Margins compress as fewer synergies are realized.

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