Story Stocks®
Updated: 02-Jun-25 10:53 ET
Campbell Soup beats Q3 expectations as at-home cooking surge drives sales (CPB)
Campbell Soup (CPB) delivered solid 3Q25 results, comfortably exceeding analysts' EPS and revenue expectations, primarily driven by a resurgence in the Meals & Beverages segment, which saw consumption trends reminiscent of peak pandemic levels in 2020 as consumers increasingly opted for at-home cooking. The acquisition of Sovos Brands, completed on March 12, 2024, also served as a significant top-line catalyst, with notable contributions from the Rao's brand, particularly in pasta sauces.
Despite the strong Q3 results, CPB only reaffirmed its FY25 EPS, revenue, and organic net sales guidance, while cautioning that it expects to land at the lower end of the $2.95-$3.05 range, excluding the impact of tariffs. The company highlighted potential incremental headwinds of $0.03-$0.05 per share if current tariffs persist, effectively signaling a slight downward adjustment to its EPS outlook. The Snacks segment continues to face challenges, with organic net sales declining 5% due to headwinds from reduced consumer discretionary spending and a shift toward private-label brands, such as Costco’s (COST) Kirkland Signature, as cost-conscious consumers prioritize value.
Despite the strong Q3 results, CPB only reaffirmed its FY25 EPS, revenue, and organic net sales guidance, while cautioning that it expects to land at the lower end of the $2.95-$3.05 range, excluding the impact of tariffs. The company highlighted potential incremental headwinds of $0.03-$0.05 per share if current tariffs persist, effectively signaling a slight downward adjustment to its EPS outlook. The Snacks segment continues to face challenges, with organic net sales declining 5% due to headwinds from reduced consumer discretionary spending and a shift toward private-label brands, such as Costco’s (COST) Kirkland Signature, as cost-conscious consumers prioritize value.
- The Meals & Beverages segment, encompassing CPB’s condensed and ready-to-serve soups, Pacific Foods broths and non-dairy beverages, Prego pasta sauces, and Pace Mexican sauces, exhibited remarkable strength in Q3. The segment reported a 7% increase in volume/mix, a 6% rise in organic net sales, and a 15% surge in total net sales to $1.46 bln, significantly bolstered by the Sovos Brands acquisition.
- Standout performers included Rao’s pasta sauces and U.S. soup products, particularly condensed soups and broth, which benefited from increased at-home cooking and the timing of shipments related to the implementation of CPB's existing SAP enterprise-resource planning system for Sovos Brands.
- In contrast, the Snacks segment, which includes Pepperidge Farm cookies, Goldfish crackers, Snyder’s of Hanover pretzels, Lance sandwich crackers, and Cape Cod chips, experienced a more uneven performance. Organic net sales fell 5% reflecting intense competition and reduced consumer spending on discretionary items.
- While new product innovations, such as Goldfish Limited Time Offerings and new Cape Cod flavors, provided some lift, the segment struggled against this challenging backdrop.
- CPB’s adjusted gross margin contracted by 110 basis points to 30.1%, pressured by several factors. Cost inflation, particularly in labor, raw materials, and supply chain inputs, combined with unfavorable net price realization, weighed on profitability. The Sovos Brands acquisition, while accretive to revenue, contributed to margin dilution in its early integration phase, though this was partially offset by supply chain productivity improvements and cost-saving initiatives.
CPB’s Q3 results showcased solid upside, driven by strong Meals & Beverages performance and the strategic boost from the Sovos Brands acquisition, particularly through Rao’s pasta sauces. However, the reaffirmed FY25 EPS guidance, leaning toward the lower end and factoring in potential tariff-related headwinds of $0.03-$0.05 per share, reflects cautious optimism amid persistent challenges in the Snacks segment and margin pressures.
