Stifel lowers Campbell Soup stock price target due to snacks recovery

Stifel lowered its Campbell Soup (CPB) price target to $38 from $40, maintaining a Hold rating, following a Q3 EPS of $0.73, which beat estimates by $0.08, although representing a 3% decline. Despite a strong dividend history and outperformance in the Meals and Beverages division, a lagging recovery in the Snacks segment and potential tariff impacts are expected to pressure EPS, leading to revised fiscal year 2025 and 2026 estimates; Jefferies and Citi also reduced their price targets to $34 and $32 respectively, citing similar concerns.

Analysis

Campbell Soup (CPB) recently reported a third-quarter earnings per share (EPS) of $0.73, which, while representing a 3% year-over-year decline, surpassed consensus estimates by $0.08. Despite this earnings outperformance, sustained revenue growth of 9.15% over the last twelve months, and an InvestingPro Fair Value model suggesting potential undervaluation with the stock at $34.26 near its 52-week low, multiple analysts have revised price targets downwards: Stifel to $38 (maintaining Hold), Jefferies to $34 (Hold), and Citi to $32 (Sell). This cautious sentiment is primarily driven by the slower-than-anticipated recovery in Campbell's Snacks division, which faces headwinds from weaker category trends and increased competition. Furthermore, the company's guidance does not account for potential tariffs projected to reduce Q4 EPS by $0.03 to $0.05. Consequently, Campbell Soup anticipates its full-year EPS will be at the lower end of its guided range, leading analysts to adjust fiscal year 2025 and 2026 EPS estimates downwards. While the Meals and Beverages division demonstrates strength with market share gains in soup, and the company maintains a strong dividend track record with 55 consecutive years of increased payments and a current yield of 4.55%, management's mitigating strategies for COGS inflation and tariffs face scrutiny regarding their ability to secure earnings growth, particularly for fiscal year 2026 if tariffs persist.

Key Decisions for Investors

• Investors should critically evaluate the persistent challenges in the Snacks division and the potential impact of unguided tariffs against the backdrop of the stock trading near its 52-week low and a supportive dividend yield.
• Monitor upcoming earnings reports and management commentary closely for signs of stabilization or further deterioration in the Snacks segment, and for clarity on tariff impacts and the effectiveness of mitigation strategies.
• Consider the divergence between analyst caution (evidenced by price target reductions and Hold/Sell ratings) and model-based undervaluation signals, factoring in specific risks like COGS inflation and competitive pressures before making or adjusting investment positions.