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Campbell Soup (CPB) Q2 Earnings Top Estimates, Sales Drop Y/Y
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Campbell Soup Company (CPB - Free Report) reported decent second-quarter fiscal 2024 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. However, net sales declined year over year while earnings remained unchanged. Management reaffirmed fiscal 2024 outlook. The company expects to conclude acquisition of Sovos Brands, Inc. in March 2024.
Quarterly Highlights
Adjusted earnings came in at 80 cents, in line with the year-ago quarter’s figure. The bottom line came ahead of the Zacks Consensus Estimate of 77 cents. Earnings in the quarter reflect a slight growth in EBIT and reduced shares outstanding, countered by increased taxes.
Net sales of $2,456 million inched down 1% year over year, though it surpassed the Zacks Consensus Estimate of $2,422.4 million. Organic net sales also dipped 1% year over year. The downside can be attributed to the soft volume/mix (down 2% year over year), somewhat offset by net price realization (up 1%). Our model suggested a volume/mix decline of 2.6% and a pricing increase of 1.7% for the quarter under review.
Campbell Soup Company Price, Consensus and EPS Surprise
The company’s adjusted gross profit was $772 million, up from $763 million reported in the prior-year quarter. The adjusted gross profit margin expanded 70 basis points (bps) to 31.4%. The uptick can be attributed to improved supply chain productivity, positive net price realization and volume/mix, along with gains from cost savings efforts. These factors negated elevated cost inflation and other supply chain costs.
Marketing and selling expenses remained unchanged at $217 million. Increased selling expenses were countered by a 6% reduction in advertising and consumer promotion expenses. Administrative expenditures jumped 17% to $189 million.
The adjusted EBIT inched up 1% to $364 million, mainly driven by increased adjusted gross profit, somewhat offset by higher adjusted other expenses, adjusted research and development expenses and adjusted administrative expenses.
Segmental Analysis
Meals & Beverages: Net sales declined 2% year over year to $1,382 million. We also expected segment sales to decline by 2%. Organic sales also dropped 2% due to softness in U.S. retail products (especially U.S. soup, Pace Mexican sauces and beverages), partially compensated by strength in foodservice and Canada. Volume/mix remained unfavorable to the tune of 2%, while net price realization remained in line with the year-ago quarter’s figures. Sales of U.S. soup fell by 3%. Operating earnings in the unit inched down 1%, primarily due to the reduced gross profit.
Snacks: Net sales in the division remained unchanged (up 1% organically) to $1,074 million. The rise in organic sales can be attributed to sales of eight power brands, which rose 4%. Our model suggested a 0.9% net sales decline in the segment.
Sales growth was fueled by a rise in cookies and crackers, specifically Goldfish crackers and Lance sandwich crackers, as well as salty snacks. A favorable net price realization of 3% contributed to the upside, which was partially offset by volume/mix declines of 2%. Segmental operating earnings jumped 7%, driven by the increased gross profit.
Other Financial Details
As of the end of the second quarter, Campbell Soup had cash and cash equivalents of about $169 million and total debt of $4,520 million. CPB generated $684 million in cash flow from operations for six months, ending Jan 28, 2024. Capital expenditures were $263 million in the said period.
CPB paid $224 million in cash dividends and bought back nearly $29 million worth of shares during the first half of the year. At quarter-end, it had nearly $301 million remaining under its current $500-million share repurchase plan and almost $75 million remaining under its $250 million anti-dilutive share repurchase plan.
Through the second quarter of fiscal 2024, the company generated $915 million in savings under its multi-year cost-saving program, including Snyder’s-Lance synergies. Management remains on track to deliver savings worth $1 billion by the fiscal 2025-end.
Image Source: Zacks Investment Research
Fiscal 2024 Guidance
Campbell Soup reiterated its guidance for fiscal 2024 based on sequential improvement in volume and better margins for key brands and categories. At present, management envisions fiscal 2024 net sales at the lower end of its guidance range. The company anticipates sequential earnings and margin improvement for the back half of fiscal 2024, reflecting a moderate inflationary environment and enhanced productivity.
For fiscal 2024, the company expects net sales growth in the range of a 0.5% decline to an increase of 1.5%. Organic sales growth is likely to range between flat and an increase of 2%. Adjusted EBIT is forecasted to be up 3-5%. Adjusted earnings per share is envisioned to increase 3-5% to $3.09-$3.15.
Shares of this Zacks Rank #3 (Hold) company have gained 2.7% in the past six months compared with the industry's growth of 2.6%.
The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and earnings suggests growth of 15.2% and 3.4%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2 (Buy). VITL has a trailing four-quarter average earnings surprise of 145%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales indicates growth of 29% from the year-ago reported actuals.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ’s has a trailing four-quarter earnings surprise of 2.6%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year sales and earnings suggests growth of 0.3% and 19.3%, respectively, from the year-ago reported numbers.
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Campbell Soup (CPB) Q2 Earnings Top Estimates, Sales Drop Y/Y
Campbell Soup Company (CPB - Free Report) reported decent second-quarter fiscal 2024 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. However, net sales declined year over year while earnings remained unchanged. Management reaffirmed fiscal 2024 outlook. The company expects to conclude acquisition of Sovos Brands, Inc. in March 2024.
Quarterly Highlights
Adjusted earnings came in at 80 cents, in line with the year-ago quarter’s figure. The bottom line came ahead of the Zacks Consensus Estimate of 77 cents. Earnings in the quarter reflect a slight growth in EBIT and reduced shares outstanding, countered by increased taxes.
Net sales of $2,456 million inched down 1% year over year, though it surpassed the Zacks Consensus Estimate of $2,422.4 million. Organic net sales also dipped 1% year over year. The downside can be attributed to the soft volume/mix (down 2% year over year), somewhat offset by net price realization (up 1%). Our model suggested a volume/mix decline of 2.6% and a pricing increase of 1.7% for the quarter under review.
Campbell Soup Company Price, Consensus and EPS Surprise
Campbell Soup Company price-consensus-eps-surprise-chart | Campbell Soup Company Quote
The company’s adjusted gross profit was $772 million, up from $763 million reported in the prior-year quarter. The adjusted gross profit margin expanded 70 basis points (bps) to 31.4%. The uptick can be attributed to improved supply chain productivity, positive net price realization and volume/mix, along with gains from cost savings efforts. These factors negated elevated cost inflation and other supply chain costs.
Marketing and selling expenses remained unchanged at $217 million. Increased selling expenses were countered by a 6% reduction in advertising and consumer promotion expenses. Administrative expenditures jumped 17% to $189 million.
The adjusted EBIT inched up 1% to $364 million, mainly driven by increased adjusted gross profit, somewhat offset by higher adjusted other expenses, adjusted research and development expenses and adjusted administrative expenses.
Segmental Analysis
Meals & Beverages: Net sales declined 2% year over year to $1,382 million. We also expected segment sales to decline by 2%. Organic sales also dropped 2% due to softness in U.S. retail products (especially U.S. soup, Pace Mexican sauces and beverages), partially compensated by strength in foodservice and Canada. Volume/mix remained unfavorable to the tune of 2%, while net price realization remained in line with the year-ago quarter’s figures. Sales of U.S. soup fell by 3%. Operating earnings in the unit inched down 1%, primarily due to the reduced gross profit.
Snacks: Net sales in the division remained unchanged (up 1% organically) to $1,074 million. The rise in organic sales can be attributed to sales of eight power brands, which rose 4%. Our model suggested a 0.9% net sales decline in the segment.
Sales growth was fueled by a rise in cookies and crackers, specifically Goldfish crackers and Lance sandwich crackers, as well as salty snacks. A favorable net price realization of 3% contributed to the upside, which was partially offset by volume/mix declines of 2%. Segmental operating earnings jumped 7%, driven by the increased gross profit.
Other Financial Details
As of the end of the second quarter, Campbell Soup had cash and cash equivalents of about $169 million and total debt of $4,520 million. CPB generated $684 million in cash flow from operations for six months, ending Jan 28, 2024. Capital expenditures were $263 million in the said period.
CPB paid $224 million in cash dividends and bought back nearly $29 million worth of shares during the first half of the year. At quarter-end, it had nearly $301 million remaining under its current $500-million share repurchase plan and almost $75 million remaining under its $250 million anti-dilutive share repurchase plan.
Through the second quarter of fiscal 2024, the company generated $915 million in savings under its multi-year cost-saving program, including Snyder’s-Lance synergies. Management remains on track to deliver savings worth $1 billion by the fiscal 2025-end.
Image Source: Zacks Investment Research
Fiscal 2024 Guidance
Campbell Soup reiterated its guidance for fiscal 2024 based on sequential improvement in volume and better margins for key brands and categories. At present, management envisions fiscal 2024 net sales at the lower end of its guidance range. The company anticipates sequential earnings and margin improvement for the back half of fiscal 2024, reflecting a moderate inflationary environment and enhanced productivity.
For fiscal 2024, the company expects net sales growth in the range of a 0.5% decline to an increase of 1.5%. Organic sales growth is likely to range between flat and an increase of 2%. Adjusted EBIT is forecasted to be up 3-5%. Adjusted earnings per share is envisioned to increase 3-5% to $3.09-$3.15.
Shares of this Zacks Rank #3 (Hold) company have gained 2.7% in the past six months compared with the industry's growth of 2.6%.
Solid Food Stocks
Post Holdings (POST - Free Report) , which operates as a consumer packaged goods holding company, sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 52.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and earnings suggests growth of 15.2% and 3.4%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2 (Buy). VITL has a trailing four-quarter average earnings surprise of 145%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales indicates growth of 29% from the year-ago reported actuals.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ’s has a trailing four-quarter earnings surprise of 2.6%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year sales and earnings suggests growth of 0.3% and 19.3%, respectively, from the year-ago reported numbers.