Key Stats for CPB Stock
- Price Change for CPB stock: -5.2%
- $CPB Share Price as of Dec. 9 $28.47
- 52-Week High: $43.85
- $CPB Stock Price Target: $33.28
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What Happened?
The Campbell’s Company (CPB) stock dropped over 5% yesterday despite beating Wall Street expectations on both the top and bottom lines. The soup and snacks company reported first-quarter net sales of $2.68 billion, down 3% from a year ago, while adjusted earnings fell 13% to $0.77 per share. Both numbers came in ahead of analyst estimates, yet investors weren’t impressed.
However, Campbell’s gross profit margin shrank 150 basis points to 29.9%, marking one of the lowest levels in years. The company faced over 500 basis points of cost pressure during the quarter as tariffs alone knocked 200 basis points off gross margins, while inflation added another 200 basis points.
The supply chain team managed to offset about 70% of these costs through productivity improvements, but it wasn’t enough to prevent the margin squeeze.
Sales pressure showed up across both divisions, with organic net sales in Meals & Beverages declining 2%, hurt by tariff-related price increases that reduced elasticity. The Snacks business saw a 1% organic decline as consumers remained cautious with spending.
Management reaffirmed full-year guidance, which includes expectations that tariffs will hit about 4% of cost of goods sold. However, the company plans to mitigate roughly 60% of that impact through various actions.
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What the Market Is Telling Us About CPB Stock
CPB stock is headed for its lowest close since 2009, suggesting investors see more than just a rough quarter here.
The market appears concerned about the sustainability of Campbell’s business model amid inflation. Gross margins at 29.9% leave little room for error, especially with more cost pressure expected in the second quarter.
The company faces a balancing act that’s proving tricky to manage. In ready-to-serve soups, Campbell’s took selective price increases to offset disproportionate tariff-related inflation.
Those price hikes worked exactly as expected from an elasticity standpoint, meaning consumers pulled back on purchases.
Management acknowledged the short-term pain but insists the pricing was necessary to protect the brand’s long-term.
The Snacks business remains under pressure as consumers get pickier about discretionary purchases. Goldfish, one of Campbell’s billion-dollar brands, showed encouraging signs during back-to-school with strong promotional performance.
But overall consumption still declined for the quarter, indicating there’s more work to do. Management emphasized that reigniting Goldfish growth is a top priority, with plans to increase marketing support and lean into price-pack architecture to deliver better value.
Rao’s pasta sauce continues to perform well with low single-digit consumption growth and maintains its position as the number one brand in the category.
Campbell’s announced it will acquire a 49% stake in La Regina, the Italian producer of Rao’s sauces, for $286 million.
The deal secures the supply of high-quality ingredients and strengthens the partnership with the Romano family. Management expects the transaction to be neutral to earnings in fiscal 2026 but should improve Rao’s margins over time.
The company’s condensed cooking soups held up well, growing share for the eighth straight quarter as consumers cook more at home.
Broth posted its ninth consecutive quarter of consumption growth. These wins in cooking-oriented products offset weakness in eating soups and specific snack categories.
Looking ahead, management expects gross margin pressure to continue through the second quarter before improving somewhat in the back half of the year.
The fourth quarter should see the most relief as the company laps some of the tariff impacts that started last year.
CPB stock will likely remain under pressure until investors see concrete evidence that margins can recover and sales trends stabilize, particularly in the Snacks business.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
