Campbell Soup’s Weak Guidance Overshadows 1Q Earnings Beat And Dividend Hike

Campbell Soup delivered better-than-anticipated results for the first quarter of fiscal 2021 (ended Nov. 1) as home dining amid the pandemic continued to drive demand. However, shares fell 2% on Wednesday as the company issued weak guidance for the fiscal second quarter.

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The consumer staples company delivered net sales of $2.34 billion, which surpassed analysts’ estimate of $2.32 billion and grew 7.2% year-over-year. Campbell (CPB) stated that volumes increased in the quarter due to heightened demand as at-home food consumption remained elevated and improved retailer soup inventories.

The company’s 1Q adjusted EPS surged 31% year-over-year to $1.02, due to higher sales and improved gross margin driven by a favorable mix and moderated promotional spending. The bottom line also gained from lower selling expenses. Campbell’s 1Q EPS beat analysts’ estimate of $0.91.

Looking ahead, the company expects sales growth of 5%-7% in 2Q FY21. It predicts adjusted EPS of $0.81-$0.83, reflecting a 12%-15% rise. The earnings guidance lagged analysts’ EPS forecast of $0.84. (See CPB stock analysis on TipRanks)

Following the print, Jefferies analyst Robert Dickerson reiterated a Buy rating on Campbell and a $58 price target, saying, “We still believe there should be limited downside from here given discounted EV/EBITDA valuation relative to peers, known topline headwinds in 2H’21/1H’22, HH penetration retention potential, and strategic optionality with the Snacks business.”

“Our Buy thesis is still contingent on what we view as the next phase of Campbell (once soup proves to be stable and ramped brand investment laps), inclusive of a more streamlined, margin-up operating structure in its snacks business that should in theory garner an improved multiple,” added Dickerson.

Meanwhile, Campbell announced a 6% hike in its quarterly dividend per share to $0.37. The new dividend is payable Feb. 1, 2021 to shareholders of record at the close of business on Jan. 9, 2021. Campbell’s dividend yield stands at 2.89%.

With shares down 4.3% year-to-date, the average price target of $57 reflects an upside potential of 20.6% from current levels. Campbell scores a Strong Buy analyst consensus backed by 3 Buys and 1 Hold.