On Thursday, TD Cowen made adjustments to its outlook on shares of Campbell Soup Company (NASDAQ:NYSE:CPB), reducing the price target to $44.00 from the previous $51.00 while keeping a Hold rating on the stock. The stock, currently trading at $42.78 and near its 52-week low, has seen six analysts revise their earnings expectations downward according to InvestingPro data.
The firm's analyst cited a range of factors for the revision, including a miss in organic sales for the first quarter and a tempered forecast for the second quarter due to softer sales trends and anticipated higher marketing and promotional spending.
The company's management has revised its expectations for the second quarter, acknowledging the need for increased investment in marketing and promotions. Although the acquisition of Sovos has delivered stronger results, partially compensating for the shortfall, the firm now regards the fiscal year 2025 guidance as overly ambitious.
Despite these challenges, Campbell Soup maintains a strong dividend track record, having maintained payments for 54 consecutive years, with a current yield of 3.47% according to InvestingPro analysis.
The unexpected departure of CEO Mark Clouse, who is leaving to pursue an opportunity with the NFL, was also noted as a negative development for Campbell Soup. Clouse has been credited with stabilizing the company over the past six years. His successor, Mick Beekhuizen, is considered well-equipped to lead, but the timing of the leadership change poses additional challenges for the company amidst broader industry uncertainties.
The analyst pointed out the current environment where investors and industry players are grappling with the implications of President Trump's Make America Healthy Again initiative and high consumer sensitivity to inflation. The Salty Snacks category, once a reliable source of growth, has ceased expanding, suggesting potential risks for a broader industry reset.
In light of these factors, TD Cowen has revised downward its earnings per share (EPS) estimates for Campbell Soup for fiscal years 2025 and 2026 by 3% and 4%, to $3.12 and $3.25, respectively. The firm also lowered its organic growth forecasts to +0.3% and +1.8% for the same periods.
According to InvestingPro's comprehensive analysis, the company maintains a FAIR financial health score, with revenue growth of 6.34% in the last twelve months. The stock currently appears undervalued based on InvestingPro's Fair Value analysis, suggesting potential upside despite near-term challenges.
Moreover, the second quarter organic growth projection has been adjusted to flat, a decrease from the previously expected +0.5%, despite management's prediction of a 1 percentage point benefit from a later Thanksgiving.
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