Piper Sandler cuts Campbell Soup target to $42, maintains Overweight

Piper Sandler reduced its price target on Campbell Soup (CPB) to $42 from $45, maintaining an Overweight rating, citing potential earnings headwinds from EU tariffs, which could impact EPS by 8-9% if reinstated. While Piper Sandler kept its FY25 EPS forecast at $3.00, it lowered the FY26 estimate from $3.20 to $3.08, reflecting tariff uncertainty and increased steel costs; other firms like TD Cowen, Citi, and UBS have also adjusted their outlooks, with some expressing concerns over cost pressures and consumption trends.

Analysis

Piper Sandler has revised its price target for Campbell Soup (CPB) downwards to $42 from $45, maintaining an Overweight rating, primarily due to concerns over potential EU tariffs which could result in an 8-9% earnings per share (EPS) headwind if reinstated. The stock, trading at $33.50, has experienced a significant decline of over 24% in the past six months, nearing its 52-week low of $32.95, though InvestingPro analysis suggests it is currently undervalued. Despite the 90-day temporary halt on EU tariffs, the uncertainty led Piper Sandler to lower its fiscal year 2026 EPS estimate from $3.20 to $3.08, while keeping the fiscal year 2025 EPS forecast at $3.00; the firm acknowledges downside risk to these estimates if tariffs are implemented. Campbell Soup also faces rising steel costs, expected to be passed on despite annual contracts, and sourcing constraints for its Rao's brand due to reliance on Italian tomato sauce and the La Regina contract. The company's financial resilience is highlighted by 55 consecutive years of dividend payments, recently affirming a $0.39 quarterly dividend. However, other analysts express caution: TD Cowen holds a Hold rating ($36 target) citing tariff challenges, Citi maintains a Sell rating ($33 target) due to cost pressures and consumption trends, and UBS initiated coverage with a Sell rating ($36 target) pointing to top-line growth difficulties and potential market share loss. Campbell Soup's current P/E ratio is 19.15x with a gross margin of 31.12%. Recent leadership appointments, including Elizabeth Duggan as President of Snacks and Janda Lukin as Chief Growth Officer, signal efforts to navigate these challenges and bolster growth.

Key Decisions for Investors

• Investors should weigh Piper Sandler's Overweight rating and InvestingPro's undervaluation assessment against the significant risks posed by potential EU tariff reinstatement and rising steel costs, which could materially impact future earnings.
• Monitor developments regarding EU tariffs closely, as their reimposition represents a key downside catalyst for Campbell Soup's EPS and stock performance, potentially negating the current valuation arguments.
• Consider the company's strong dividend history and consistent profitability, but balance this with the challenging operational environment, including input cost inflation, sourcing dependencies, and mixed analyst sentiment before adjusting positions.