Soup Stock Sours: Analyst Wary Of Campbell's Snack Woes As Tariffs Weigh On Profitability

RBC Capital Markets analyst Nik Modi slashed the price forecast for The Campbell’s Company CPB from $44 to $38 while maintaining a Sector Perform rating.

What Happened: The canned soup company reported third-quarter sales of $2.475 billion. It beat the consensus estimate of $2.43 billion, while the adjusted EPS of 73 cents beat the consensus estimate of 66 cents.

Campbell’s now expects adjusted EPS to be at the low end of the guided range of $2.95 – $3.05. Compare that to the consensus estimate of $2.98 owing to the slower-than-anticipated recovery in the Snacks business.

Assuming current tariffs hold steady, the company estimates that the net incremental headwind on adjusted EPS could be up to 3 cents to 5 cents per share.

Modi says that despite beating quarterly EBIT and EPS estimates, management now projects lighter full-year profitability. The company’s snacks segment did not recover and estimates could drop further if tariffs remain in place.

As for what’s more expensive:

• Canadian soup
• Tinplate and aluminum, and
• Rao’s finished goods and raw materials from Italy.

Taking about key positives, the analyst notes that management cited that softening consumer sentiment is driving a preference for home-cooked meals and ingredients that stretch tight food budgets.

These factors significantly boosted Meals & Beverages (M&B), especially for condensed cooking soups, broth, and Italian sauces, adds the analyst.

Nevertheless, Modi writes that while shifting consumer sentiment aided the M&B segment, it pressured CPB’s discretionary Snacks categories, leading to a 3% consumption decline in the division.

The analyst maintained the FY25 organic growth estimate to be just below the midpoint of guidance at -1.2% while reducing the EBIT growth estimate to +1.4% (from +3.2%) and EPS growth to -5.6% (from -3.6%).

The estimates revision reflects the analyst’s assumptions that tariffs will remain in effect throughout the quarter.

The analyst says that their FY26 numbers are also recalibrated lower, anticipating continued profitability pressure into next year.

Also, Bank of America Securities analyst Peter Galbo maintained an Underperform rating and cut the price forecast from $37 to $33.

The analyst adjusted FY25 estimates downward to reflect softer trends in the Snacks division (expected to have an extended recovery into FY26), a roughly 3-point headwind for M&B in the fourth quarter due to shipment timing, and a four-cents-per-share impact from tariffs in the fourth quarter.

The analyst adds that Campbell’s has strong snacking brands, but the category struggles with finding optimal value price points.

Galbo says that this challenge exists because snacking, being a more discretionary purchase, needs to feel “worth it” to consumers.

Acknowledging the volatile tariff environment, the analyst slashed the FY25 adjusted EPS estimate to $2.91 (from $2.98). This reflects a weaker-than-anticipated exit rate into FY26.

Also, the analyst reduced the FY26 adjusted EPS estimate to $2.65 (from $3.00). That’s assuming a similar per-share impact from tariffs through the first three-quarters of FY26.

Apart from this, these analysts also made changes to their price forecast:

• Barclays analyst Andrew Lazar maintained an Underweight rating and lowered the price forecast from $40 to $35.
• Morgan Stanley analyst Megan Alexander maintained an Equal-Weight rating and trimmed the price forecast from $40 to $35.
• Citigroup analyst Thomas Palmer maintained a Sell rating and lowered the price forecast from $33 to $32.

Price Action: CPB shares are down 0.76% at $33.99 at the last check Tuesday.

Read Next:

• ‘Touch of Premium Indulgence,’ Says Campbell’s CEO, As ‘Splurge-Worthy’ Milano Cookies Defy Snack Slump

Image: Shutterstock