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Earnings preview: What to expect from Campbell Soup Q3?

Campbell Soup Company (CPB) is scheduled to report its earnings results for the third quarter of 2019 on Wednesday before the market opens. The results will be hurt by the unfavorable weather conditions and the management’s inability to handle the complexities involved in dealing with the farm-based food business.

The top line will be benefited by snacking business due to its intention to strengthen its Global Biscuits and Snacks segment. In addition, the buyout of Snyder’s-Lance and better marketing and innovation could enhance the segment’s performance. The acquisitions, which have been driving the company to boost its portfolio, are anticipated to drive the company’s top line performance.

Campbell Soup is likely to witness a continued increase in transportation and logistics expenses as well as cost inflation of aluminum, steel cans, vegetables, and resins. Also, the profitability will be hurt by higher supply chain and promotional expenditure.

Analysts expect the company’s earnings to dip by 32.90% to $0.47 per share while revenue will increase by 11.30% to $2.36 billion for the third quarter. In comparison, during the previous year quarter, the company posted a profit of $0.70 per share on revenue of $2.12 billion.

Also read: Cracker Barrel Q3 earnings preview

Campbell Soup has surprised its investors by beating analysts’ expectations in the past four quarters. It is expected that the company will report upbeat results for the third quarter. Majority of the analysts recommended a “hold” rating with a price target of $34.83 per share.

For the second quarter, the company reported a 24% increase in net sales helped by benefits from the recent acquisitions of Snyder’s-Lance and Pacific Foods. Organic sales were comparable to the prior year as gains in Global Biscuits and Snacks were offset by declines in Campbell Fresh as well as Meals and Beverages.

Due to impairment charges related to the Campbell Fresh segment, the company posted a loss compared to a profit last year. Adjusted EPS decreased by 23% year-over-year due to EBIT declines in the base business, a higher adjusted tax rate and a dilutive impact from the Snyder’s-Lance and Pacific Foods acquisitions.

For the full year of 2019, on a pro forma basis, assuming divestitures, the company expects net sales to be $7.9 billion to $8.0 billion and adjusted EPS in the range of $2.40 to $2.50. Pre-divestitures, net sales are expected to range between $9.9 billion and $10.1 billion while adjusted EPS is expected to be $2.45 to $2.53.

Shares of Campbell Soup opened lower on Monday but changed course to the green territory on the NYSE. The stock has risen over 10% in the past year and over 1% in the past three months.

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