The Campbell's Company CPB delivered mixed results for the first quarter of fiscal 2025. While the bottom line beat the Zacks Consensus Estimate but declined year over year, the top line missed the consensus mark while increasing from the year-ago period level. That said, organic sales declined.
The first-quarter performance reflects the company’s ability to navigate a dynamic consumer landscape and the irregular pace of category recovery. The second quarter, which features the crucial holiday season, is likely to witness sequential enhancements in top-line results and market share.
In a separate release, management revealed the election of Mick Beekhuizen as president, CEO and director, effective Feb. 1, 2025. He will succeed the current president and CEO, Mark Clouse, who plans to retire from his roles, effective Jan. 31, 2025.
CPB’s Quarterly Performance: Key Metrics and Insights
Adjusted earnings came in at 89 cents, down 2% year over year due to increased interest expenses, partly made up by higher adjusted earnings before interest and taxes (EBIT). However, the bottom line came ahead of the Zacks Consensus Estimate of 87 cents.
The Campbell's Company Price, Consensus and EPS Surprise
The Campbell's Company price-consensus-eps-surprise-chart | The Campbell's Company Quote
Net sales of $2,772 million grew 10% year over year while missing the Zacks Consensus Estimate of $2,793 million. Sales were backed by the Sovos Brands acquisition. Organic net sales dipped 1% due to a 1% decline in net price realization, while volume/mix remained flat.
The company’s adjusted gross profit was $871 million, up from $808 million reported in the prior-year quarter. The adjusted gross profit margin contracted 70 basis points (bps) to 31.4% due to the acquisition impact, cost inflation, other supply-chain costs and planned adverse net price realization. These were partly made up by supply-chain productivity improvements and gains from cost-saving efforts.
Adjusted marketing and selling expenses escalated 10% to $241 million. Adjusted administrative expenditures rose 9% to $164 million due to the acquisition impact, increased general and administrative costs and inflation, compensated by cost savings efforts.
The adjusted EBIT jumped 6% to $432 million.
Decoding CPB’s Segmental Performance
Meals & Beverages: Net sales in the segment came in at $1,706 million. Sales surged 22% year over year on the Sovos Brands acquisition. Excluding this, organic sales were flat year over year, as improvements in Canada, foodservice and Prego pasta sauces were negated by softness in U.S. Soup. The volume/mix remained favorable to the tune of 1%, while net price realization declined by an equal rate. Sales of U.S. soup decreased due to retailer inventory movement timing stemming from the Thanksgiving holiday. Operating earnings in the unit ascended 17%.
Snacks: Net sales in the division amounted to $1,066 million, which fell 4%. Excluding the impact of the Pop Secret divestiture, organic sales went down 2% due to softness in partner and contract brands, Pepperidge Farm cookies, Late July snacks and Goldfish crackers. Sales were affected by a 1% dip each in net price realization and volume/mix. Segmental operating earnings tumbled 12%.
A Look at CPB’s Other Financial Metrics
As of the end of the reported quarter, Campbell's had cash and cash equivalents of $808 million and total debt of $7,917 million. CPB generated $225 million in net cash from operating activities for the three months ended Oct. 27, 2024. Capital expenditures were $110 million in the said period.
CPB paid $116 million in cash dividends and bought back nearly $54 million worth of shares during the first quarter. In September 2024, management authorized a new anti-dilutive buyback plan of up to $250 million, which replaced the company’s June 2021 anti-dilutive buyback program. As of the first-quarter end, Campbell’s had nearly $206 million remaining under this anti-dilutive share repurchase plan and about $301 million remaining under its September 2021 strategic buyback program.
Management unveiled a 5% annual dividend hike, taking its quarterly dividend from 37 to 39 cents per share. The increased dividend is payable on Jan. 27, 2025 to shareholders of record as of Jan. 2.
During the first quarter, Campbell's generated $30 million in savings under its new cost savings program of $250 million.
CPB’s Fiscal 2025 Guidance
Campbell's fiscal 2025 guidance reflects a balanced approach, combining optimistic and cautious expectations as the company navigates a dynamic consumer landscape and irregular category recovery. The higher end of the forecast suggests a more rapid return to normal consumer conditions, while the lower end predicts a more conservative recovery.
Management reiterated its guidance, which was provided on Aug. 29, 2024, and excludes any impact from the pending divestiture of the noosa yoghurt business (expected to close in the first quarter of the calendar year 2025).
For fiscal 2025, the company expects net sales growth in the range of 9-11%. Campbell's expects organic net sales growth in the range of flat to up 2%.
Adjusted EBIT growth is likely to be roughly 9-11%. Adjusted EPS is envisioned to increase 1-4% to the $3.12-$3.22 band in fiscal 2025 compared with $3.08 delivered in fiscal 2024.
Shares of this Zacks Rank #3 (Hold) company have risen 3.2% in the past three months against the industry's decline of 0.6%.
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