Campbell's Q2 Earnings Report: Sales Fall Short Despite Acquisition Gains

The Campbell’s Company, known for its canned soup and food products, has seen its shares decline in premarket trading on Wednesday.

In its second-quarter earnings report, Campbell’s announced a sales increase of 9% to $2.685 billion, although this fell short of the expected $2.74 billion projected by analysts.

This growth was mainly attributed to the acquisition of Sovos Brands, which has added value to their product offerings. However, when looking at organic sales, there was actually a decline of 2%, bringing organic net sales down to $2.4 billion. This decrease was attributed to net price realization while the volume and product mix remained flat.

In detail, the Meals & Beverages segment reported a strong net sales increase of 21%, largely due to the Sovos acquisition. Conversely, the Snacks segment experienced a decline in net sales of 6% during the same period.

Despite the increase in sales, Campbell's gross margin contracted by 110 basis points year-over-year, settling at 30.5%. The company recorded an adjusted EBIT of $372 million, reflecting a 2% increase from the previous year.

On a positive note, the adjusted earnings per share (EPS) were reported at $0.74, surpassing analyst expectations of $0.72.

As of January 26, 2025, Campbell's had substantial liquidity, holding $829 million in cash and equivalents. Over the first six months of the year, operating cash flow reached $737 million. So far this year, the company has distributed $227 million in cash dividends and has repurchased approximately $56 million worth of common stock.

As of the end of the second quarter, the company still had around $205 million left under its anti-dilutive share repurchase program, as well as about $301 million under its September 2021 strategic share repurchase program. Campbell's has successfully achieved about $65 million in savings under its $250 million cost savings initiative announced in September 2024.

The President and CEO of Campbell's, Mick Beekhuizen, stated, "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’s is now projecting net sales growth between 6% and 8%, down from the previous estimate of 9% to 11%, and adjusted EBIT growth of 3% to 5%, a reduction from the former prediction of 9% to 11% growth. Furthermore, the adjusted EPS guidance has changed to a range of $2.95 to $3.05, reduced from the earlier estimate of $3.12 to $3.22, compared to the consensus estimate of $3.13.

The company’s latest guidance has not considered potential impacts from possible import tariffs imposed by the U.S. government as well as retaliatory measures from other nations.

In current trading, Campbell's shares were down by 6.74%, trading at around $37.62.

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