Campbell Soup Company (NYSE:CPB) is slated to report earnings before the market opens on Wednesday. Analysts at UBS expect a beat, but it might not be enough to heat up the share price.
The analysts maintained their Sell rating and raised the price target to $48 from $47. Campbell’s shares fell nearly 2% Tuesday to $50.58.
“We expect CPB to deliver a 3Q FY23 profitability beat,” the analysts wrote in a note published over the weekend. “Based on our conversations with investors, the buy-side bogey is at least 5% [organic sales growth] and $0.67 in EPS.”
The Street consensus is revenue of $2.23 billion and earnings of $0.65 per share, compared to $2.13 billion and $0.62 per share a year earlier.
“The magnitude of EPS beat this quarter will likely be dictated by the company's decision to reinvest in the business, in our opinion,” analysts wrote. “As a result, we lower our FY23 EPS estimate to $3.03 (from $3.05) but increase our FY24 EPS estimate to $3.14 (from $3.11).”
Campbell bulls and bears both expect positive results. The question is where the company goes from there.
“Based on our conversations with investors, we believe that the bulls are looking for a clean beat and raise in the quarter with signs of sustainable earnings growth into next year. As a result, if the magnitude of EPS beat in the quarter falls modestly short of expectations due to reinvestment into the business, we believe investors will likely give the stock a pass with an eye towards higher earnings growth next year due to share gains in snacks and curbing share loss in soup.”
They continued, “The bears also expect strong results in 3Q23 due to remaining price benefits and relatively subdued elasticity. However, we continue to hear concerns surrounding the balancing act between market share and profitability, which we share.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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