Credit Suisse Thinks Campbell Soup's FY23 Guidance As Too Conservative, Bumps Up Price Target By 4%

  • Credit Suisse analyst Robert Moskow reiterated a Neutral rating on the shares of Campbell Soup Company CPB and raised the price target from $52 to $54.
  • Campbell reported a strong EPS in Q1 FY23 and raised the FY23 outlook.
  • The analyst noted that Q1 was a good quarter, but some of the beat came from an unexpected rebound in foodservice and lower-than-expected promotional discounts.
  • The quarter benefited from retailers restoring inventory, which won’t repeat in Q2, the analyst added.
  • The analyst expects sales growth to decelerate to 11% in Q2 due to normalization of inventory levels and restoration of promotional discounts (particularly in soup) and gross margin to decline sequentially by at least 100 basis points.
  • Despite the one-time benefits in Q1, the analyst views the new guidance for FY23 as too conservative, implying a low single-digit decline in operating profit in the back half of the year.
  • While the market views price increase as a positive read-through to the food group, Moskow sees a rising risk of retailer pushback and trade-down to private label. 
  • Management justified its price actions by saying that packaging contracts for steel and resin did not rerate lower as originally expected for calendar 2023.
  • However, they also did not raise their low teens inflation guidance materially higher for the year.
  • Price Action: CPB shares are trading higher by 0.39% at $56.40 on the last check Thursday.
  • Photo Via Company
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