Campbell's Reports Q2 Earnings: Sales Lag Despite Sovos Contribution

The Campbell’s Company (NASDAQ: CPB), known for its canned soup products, saw its shares decline in premarket trading on Wednesday following the release of its second-quarter earnings report.

In the second quarter, Campbell reported a 9% increase in net sales, reaching $2.685 billion. However, this fell short of the analyst consensus estimate of $2.74 billion. The sales growth was significantly boosted by the acquisition of Sovos Brands.

On an organic basis, net sales experienced a decrease of 2%, totaling $2.4 billion. This drop was attributed to net price realization while the volume and mix remained flat. The company's Meals & Beverages segment showed a remarkable 21% increase in net sales, largely due to the Sovos acquisition, while the Snacks category saw a 6% decline.

Campbell's gross margin faced a contraction of 110 basis points year-over-year, settling at 30.5%. Adjusted EBIT (Earnings Before Interest and Taxes) recorded a modest 2% year-over-year increase, amounting to $372 million. Additionally, the adjusted earnings per share (EPS) stood at $0.74, surpassing the consensus estimate of $0.72.

As of January 26, 2025, Campbell held $829 million in cash and equivalents. Over the first six months of the year, operating cash flow totaled $737 million. The company has returned $227 million in cash dividends to shareholders and repurchased approximately $56 million of common stock year-to-date. By the end of the second quarter, about $205 million remained under the company's anti-dilutive share repurchase program, alongside around $301 million left from the strategic share repurchase program initiated in September 2021.

Through the second quarter, Campbell has achieved approximately $65 million in savings from its $250 million cost savings program that was announced in September 2024.

Looking ahead, President and CEO Mick Beekhuizen expressed caution regarding the company’s performance, noting, “Given the softness in some of our snacking categories, the anticipated sequential top-line improvement did not materialize during the quarter, and we now have a more muted second half expectation. As a result, we are updating our full-year guidance.”

FY25 Outlook: Campbell now anticipates a net sales growth of 6% to 8%, down from the previous forecast of 9% to 11%. The adjusted EBIT is expected to grow by 3% to 5%, revising down from an earlier estimate of 9% to 11%. Furthermore, the company expects adjusted EPS to be between $2.95 and $3.05, a decrease from the previous range of $3.12 to $3.22 and slightly below the estimate of $3.13.

It is important to note that the company’s guidance does not take into account any potential impacts arising from future U.S. government import tariffs or retaliatory measures by other nations.

In terms of stock performance, shares of Campbell were trading lower by 6.74% at $37.62 in premarket activity.

Campbell, Earnings, Stocks