Campbell Soup Q4 Net Sales Jump 18%, Forecast 5-7% Increase in Current Quarter; Target Price $59 in Best-Case

Campbell Soup Co, a US-centric packaged food company, reported an 18% surge in net sales in the fourth quarter and forecasts a 5-7% increase in the ongoing quarter as shoppers bought more Prego pasta sauces and Goldfish crackers during COVID-19 pandemic.

The food and snack processing company said its fourth-quarter net sales increased 18% and organic net sales increased 12% reflecting continued increased demand for products. The company said its earnings per share (EPS) from continuing operations were $0.28, increased from a loss of $0.02; Adjusted EPS of $0.63 increased 50%.

Campbell Soup’s full-year net sales and organic net sales increased 7% and EPS from continuing operations of $1.95 increased 24%. Given the uncertain operating environment due to the COVID-19 pandemic, the Company is providing guidance limited to the first quarter of fiscal 2021, the company said.

Campbell Soup’s shares traded slightly higher at $53.50 on Thursday. Also, the stock is up over 6% so far this year.

Executive comments

“Our strong fourth-quarter and full-year fiscal 2020 performance were enabled by the extraordinary work of our teams who remained agile and resilient in a challenging operating environment. We continued to invest in our businesses during the quarter as we experienced unprecedented demand for our products and welcomed millions of new households to the Campbell portfolio,” said Mark Clouse, Campbell’s President and CEO.

“This quarter concluded a year that furthered our strategic plan and solidified a significantly strengthened foundation that we will build upon going forward as we begin fiscal 2021.”

Campbell Soup stock forecast

Seven analysts forecast the average price in 12 months at $52.14 with a high forecast of $59.00 and a low forecast of $40.00. The average price target represents a -0.59% decrease from the last price of $52.45. From those seven analysts, two rated “Buy”, two rated “Hold” and three rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $52 with a high of $67 under a bull-case scenario and $34 under the worst-case scenario. Evercore ISI raised their target price to $56 from $54. Piper Sandler raised their price objective on Campbell Soup from $55.00 to $58.00 and gave the stock an “outperform” rating.

Other equity analysts also recently updated their stock outlook. Bernstein lowered their rating to underperform from market perform and cut target price to $40 from $49. Campbell Soup had its target price hoisted by equities researchers at UBS Group to $45 from $44. The firm presently has a “sell” rating on the stock.  JPMorgan Chase & Co. boosted their target price to $52 from $51 and gave the stock a “neutral” rating.

Analyst view

“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,” said Pamela Kaufman, equity analyst at Morgan Stanley.

“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,” she added.

Upside and Downside risks

Upside: 1) Soup volumes recover; new innovation translates to topline growth. 2) Strategic advertising/marketing resonates with consumers. 3) CPB increases share in cookies/crackers – highlighted Morgan Stanley.

Downside: 1) Unable to improve soup growth; negative consumer perceptions continue. 2) PEP and MDLZ present greater headwinds in snacking categories. 3) Pepperidge Farm sales weaken, dragging snacking growth. 4) Margins compress as fewer synergies are realized.

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