Campbell Soup Company (NYSE: CPB) reported its fiscal Q2 2022 earnings and revenue results on Wednesday, March 9, 2022, which beat earnings but marginally missed revenue estimates.
What to look for: The company indicated that Q2 2022 was challenging as it navigated labor challenges and supply chain disruptions, which were more challenging by the surge of the Omicron variant. However, the company is upbeat going into the second half of fiscal 2022 with service levels and labor availability improving, strong demand levels, and better inflation mitigation with pricing, which underpins upbeat guidance.
Earnings: Stockearning’s Estimated EPS for Q2 2022 was pegged at $0.68 per share, but the company reported net income of $0.7 per share and adjusted earnings of $0.69 per share. In the first quarter, the company produced a 9.88 earnings surprise with an actual EPS of $0.89 versus an estimated $0.81 per share. Historical EPS Performance shows that in the past 12 quarters, the company has topped estimates 26 times (72%), met four times (11%), and missed six times (16%).
Revenue: Net revenue was down 3%, while organic sales were down 2% YoY. Demand remained strong as consumption increased 1% versus a year ago and up 9% from 2020. Net sales were $2.21 billion in the second quarter compared to $2.28 billion a year ago. For the six months ended January 31, 2022, the company had revenue of $4,445 billion versus $4.619 billion a year ago.
Stock movement: CPB shares have gained 2.9% since the company released its last earnings release. Interestingly, following the earnings release, the company's shares have been DOWN 30 times in the past 48 quarters. So, the historical price reaction suggests a 62% probability of the share price going DOWN following the earnings release. According to the Stockearning algorithm, the predicted volatility on the first day is +/-3%, while the predicted volatility on the seventh day is +/-4%.
What analysts are saying: Deutsche Bank analyst Steve Powers raised his price target in the stock from $45 to $46 and maintained a Hold rating in the shares ahead of fiscal Q2 2022 earnings results.
Morgan Stanley analyst Pamela Kaufman raised her [price target on the stock from$4 to $5 and maintained a Hold rating on the shares. According to Kaufman, the Packaged Food group has underachieved the market in the last year but has outperformed the market within the past month because of sector rotation and an increase in COVID-19 cases, which supports short-term demand. However, she anticipates food multiples to be capped by a more difficult underlying outlook, and she advises investors to search for companies that are leveraging a post-COVID topline rebound and benefiting from cyclical growth tailwinds with better pricing power.
Recently RBC Capital analyst Nik Modi slashed the company's price target from $59 to $54 but maintained a buy rating in the stock. However, according to Modi, investors' concerns over Campbell Soup's capacity to offset inflation may limit further upside in the short term.
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