Cautious Outlook on Campbell Soup: Balancing Optimism with Emerging Risks

J.P. Morgan analyst Kenneth Goldman downgraded the rating on Campbell Soup (CPB – Research Report) to a Hold today, setting a price target of $37.00.

Kenneth Goldman has given his Hold rating due to a combination of factors impacting Campbell Soup’s stock. Initially, there was optimism about the potential sales growth from the Rao’s brand and synergies from its acquisition, as well as productivity improvements in the Snacks segment. However, these expectations have not fully materialized, with Rao’s growth slowing and the anticipated margin improvements in the Snacks segment being delayed, possibly indefinitely. As a result, the stock is now perceived to be trading near its fair value.
Looking forward, Goldman considers it prudent to adopt a conservative approach by modeling the lower end of the company’s EPS guidance due to potential tariff risks, which have not been accounted for in the management’s outlook. Additionally, while there are some positive factors such as favorable comparisons in the Snacks segment and reduced interest expenses, there are also concerns about potential cost increases due to inflation in raw materials and continued investment in pricing. Furthermore, the overall snacking category remains uncertain, and there is a need to incorporate tariff risks into future projections. This cautious stance is not a reflection on the new CEO, Mick Beekhuizen, whose transparency and willingness to adjust guidance were noted positively.

In another report released yesterday, Evercore ISI also maintained a Hold rating on the stock with a $48.00 price target.

Based on the recent corporate insider activity of 30 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of CPB in relation to earlier this year.