Campbell Soup Company Reports Q3 2024 Earnings: Stable Organic Net Sales and Double-Digit Growth in Adjusted EBIT and EPS

Campbell Soup Company reported compelling third-quarter fiscal 2024 results, with stable organic net sales and double-digit growth in adjusted EBIT and EPS. The company's recent acquisition of Sovos Brands, contributing to its expansion, and the strong performance of the Meals & Beverages division were key drivers of these results. Despite a slight decline in the Snacks business organic net sales, the company remains bullish on the long-term growth potential of its snacking portfolio and the broader snacking market.

Key Takeaways:

  • Campbell Soup reported stable organic net sales and double-digit growth in adjusted EBIT and EPS for Q3 2024.
  • The integration of Sovos Brands, acquired in March, has positively contributed to overall growth.
  • The Meals & Beverages division showed comparable organic net sales and volume growth, while the Snacks business saw a slight decline.
  • The company is optimistic about the long-term growth of the snacking category, despite recent market slowdowns.
  • Investments are being made to optimize the supply chain and reduce costs, including a $230 million investment and a reduction of 415 roles over two years.
  • The company updated its full-year guidance, expecting reported net sales to increase approximately 3% to 4%.

Company Outlook:

  • Campbell Soup Company expects a recovery in the first half of fiscal 2025.
  • Full-year reported net sales are projected to grow 3% to 4%, with organic net sales being flat to down 1%.
  • Adjusted EBIT growth is anticipated to be around 6.5% to 7% for the full year, with adjusted EPS growth of about 2% to 3%.

Bearish Highlights:

  • The Snacks business organic net sales experienced a slight decline.
  • Organic net sales growth expectations have been lowered, now projected to be approximately flat to down 1%.
  • The company has seen slower trends in snacking categories over recent quarters.

Bullish Highlights:

  • Campbell's soup portfolio has seen improvements in market share, particularly in cooking and ready-to-serve segments.
  • The frozen meal business and noosa yogurt business have exceeded expectations.
  • Snacks have shown 8% consumption growth over the last three years, outperforming the average for total food and historical snack growth.

Misses: Year-to-date margin improvement was 40 basis points, with the goal of reaching a 15% margin for the full year. Strong cash flow of nearly $900 million through Q3 was reported, slightly lower than the previous year due to acquisition costs.

Q&A Highlights:

  • CEO Mark Clouse expressed confidence in the integration of Rao's and its positive impact on the company's performance.
  • The company plans to maintain competitive pricing in the snacks category without resorting to heavy discounting.
  • Campbell's foodservice business has seen growth, driven by snacking capacity and demand for frozen soup.

For the full transcript, visit https://www.investing.com/news/earnings/capital-markets/campbell-soup-company-cpb-q3-2024-earnings-call-transcript-1781096401.

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