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.
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