EPS of $0.68 increased by 25.9% from previous year
Gross margin of 31.6%
Net income of 203.00M
"âOrganic net sales in the second quarter decreased 1% to $2.5 billion, in line with consumption ⌠On a two-year compound annual growth rate basis, top line grew 6%, adjusted EBIT increased 1%, and adjusted EPS was comparable to the prior year.â" - Mark Clouse
Campbell Soup Company (CPB) QQ2 2024 Results Analysis: Margin Expansion, Brand Momentum, and Sovos Acquisition Progress in a Stabilizing Consumer Environment
Executive Summary
Campbell Soup Company delivered a modestly softer organic top line in Q2 FY2024, with organic net sales down 1% year over year, in line with stabilized category performance as management anticipated. The company achieved margin expansion in both its Meals & Beverages and Snacks divisions, lifting adjusted EBIT by 1% and driving an 14.8% adjusted EBIT margin in the quarter. Management reaffirmed the full-year guidance, expects modest sequential topâline improvement in the second half, and highlighted several catalysts that could accelerate earnings: (i) the Sovos Brands acquisition, which is expected to close in the week of March 11, 2024, (ii) ongoing margin initiatives and productivity, (iii) an intensified innovation and marketing program, and (iv) margin upside from a 100 bp annual run-rate improvement in Snacks toward a 17% target by FY26. The company also underscored transformative route-to-market changes in Snacks (DSD consolidation and combo routing) with a target to convert about 20% of Snacks routes to combo routes over a multi-year plan. Notably, Goldfish surpassed $1 billion in net sales, signaling continued strength in brand momentum, while Raoâs exposure and the Pacific Foods integration are anticipated to augment the combined growth profile postâSovos. Cash flow remained robust, with operating cash flow of $510 million in the first half and free cash flow of $390 million, supporting a net debt position of $4.35 billion (2.6x net debt to adjusted EBITDA). Overall, Campbell remains a high-quality Defensive play with improving margins and meaningful optionality from strategic acquisitions and portfolio optimization, albeit with a nearâterm topâline path that remains sensitive to consumer demand and inflation dynamics.
Key Performance Indicators
Revenue
2.46B
QoQ: -2.46% | YoY:10.18%
Gross Profit
776.00M
31.60% margin
QoQ: -1.52% | YoY:16.17%
Operating Income
317.00M
QoQ: -11.45% | YoY:24.80%
Net Income
203.00M
QoQ: -13.25% | YoY:26.88%
EPS
0.68
QoQ: -13.92% | YoY:25.93%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $2.456 billion in Q2 FY2024; YoY +10.18%, QoQ -2.46% (per incomeMetrics). Organic net sales declined 1% in Q2 (lapped 13% gain in prior year; 2-year CAGR +6%).
Gross Profit: $776 million; gross margin approximately 31.6% (grossProfitRatio 0.3160). YoY gross profit up ~16.2%; QoQ down ~1.5% as cost inflation and input costs moderated.
Adjusted EBIT: $413 million; EBITDA margin ~16.8% (EBITDARatio 0.1682); adjusted EBIT margin benefited from productivity and pricing leverage.
Net Income and EPS: Net income $203 million; net margin ~8.27%. GAAP EPS $0.68; Adjusted EPS $0.80 (lapped stronger prior-year performance).
Financial Highlights
Overview of quarterly results and key drivers:
- Revenue: $2.456 billion in Q2 FY2024; YoY +10.18%, QoQ -2.46% (per incomeMetrics). Organic net sales declined 1% in Q2 (lapped 13% gain in prior year; 2-year CAGR +6%).
- Gross Profit: $776 million; gross margin approximately 31.6% (grossProfitRatio 0.3160). YoY gross profit up ~16.2%; QoQ down ~1.5% as cost inflation and input costs moderated.
- Operating Income: $317 million; operating margin ~12.9% (operatingIncomeRatio 0.1291).
- Adjusted EBIT: $413 million; EBITDA margin ~16.8% (EBITDARatio 0.1682); adjusted EBIT margin benefited from productivity and pricing leverage.
- Net Income and EPS: Net income $203 million; net margin ~8.27%. GAAP EPS $0.68; Adjusted EPS $0.80 (lapped stronger prior-year performance).
- Cash Flow: Operating cash flow $510 million in H1; capital expenditures $120 million; free cash flow $390 million. End-of-period cash $169 million; net debt $4.351 billion; net debt to adjusted EBITDA 2.6x.
- Balance Sheet: Total assets $12.106 billion; total liabilities $8.255 billion; total stockholdersâ equity $3.849 billion. Goodwill and intangibles total $7.071 billion; strong brand portfolio supporting ongoing cash flow generation.
- Leverage and Liquidity: Revolver undrawn ~ $1.85 billion; cash and equivalents $169 million; long-term debt $4.506 billion; total debt $4.52 billion. The company reaffirmed guidance with liquidity to close the Sovos acquisition and fund growth.
- Valuation-ish Metrics (peers via provided ratios): price-to-earnings ~16.1x; price-to-sales ~5.31x; price-to-book ~3.39x; dividend yield ~0.84%. Compared with peers in the provided set (GIS, HRL, KHC, MKC, etc.), Campbell exhibits solid cash generation and a improving margin trajectory but generally trades at a range consistent with diversified consumer staples equities.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.46B
10.18%
-2.46%
Gross Profit
776.00M
16.17%
-1.52%
Operating Income
317.00M
24.80%
-11.45%
Net Income
203.00M
26.88%
-13.25%
EPS
0.68
25.93%
-13.92%
Key Financial Ratios
currentRatio
1.01
grossProfitMargin
31.6%
operatingProfitMargin
12.9%
netProfitMargin
8.27%
returnOnAssets
1.68%
returnOnEquity
5.27%
debtEquityRatio
1.17
operatingCashFlowPerShare
$1.71
freeCashFlowPerShare
$1.31
dividendPayoutRatio
54.2%
priceToBookRatio
3.39
priceEarningsRatio
16.07
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the earnings call and Q&A:
- Top-line trajectory and guidance: Mark Clouse noted, âorganic net sales in the second quarter decreased 1% to $2.5 billion, in line with consumption ⌠On a two-year CAGR basis, top line grew 6% ⌠we reaffirmed our full-year outlook.â He also framed the back-half trajectory as a steady glide path: âflat to low single digit organic net sales growth in Q3, with continued sequential improvement in the fourth quarter.â
- Margin and profitability: Carrie Anderson highlighted margin expansion, stating, âsecond quarter adjusted gross profit margin was 31.4% ⌠70 basis points margin expansion ⌠cost savings initiatives and supply chain productivityâ and that âadjusted EBIT margin increased 20 basis points to 14.8% in the quarter.â She also underscored disciplined pricing, noting ânet pricing averaged 1% for the quarterâ and Wave 4 pricing has lapped.
- Strategic developments: Mark emphasized Sovosâ contribution to the long-term growth story and the strategic fit with Campbellâs portfolio, noting that Sovos surpassed $1 billion in annual net sales (Raoâs strength) and stating that overlaying Sovos with CPB would have yielded âapproximately four points of organic top line growthâ historically. He also announced an upcoming Investor Day and reiterated the Sovos closing timeline (week of March 11, 2024).
- Brand momentum and portfolio Transformation: The call highlighted Goldfish crossing $1B in net sales and the ambition to make Goldfish a North American mega brand, with Canadian and Latin American white space identified for growth. The combo-route DSD pilot was described as a pay-as-you-go model with target to convert about a fifth of Snacks routes nationwide, aimed at improving scale and service while maintaining financial flexibility.
- Market conditions and consumer behavior: Management described stabilizing consumer indicators (sentiment, household penetration) but continued sensitivity to inflationary inputs, with plans to maintain promotional discipline and a strong innovation pipeline to drive growth in the back half.
âOrganic net sales in the second quarter decreased 1% to $2.5 billion, in line with consumption ⌠On a two-year compound annual growth rate basis, top line grew 6%, adjusted EBIT increased 1%, and adjusted EPS was comparable to the prior year.â
â Mark Clouse
âWe reaffirmed our full-year outlook as we anticipate continued sequential improvement in top line earnings and margin progress while sustaining our best-in-class navigation of this volatile environment.â
â Mark Clouse
Forward Guidance
Guidance and outlook are anchored by a cautious but constructive view on the back half of FY2024:
- Net sales guidance: CPB reiterates expectations for flat to low single-digit organic net sales growth in Q3, followed by sequential improvement in Q4. Management indicated the full-year net sales guidance is being paced toward the lower end, reflecting ongoing category stabilization with a pragmatic view on in-market recovery speed.
- EPS and margins: For Q3, adjusted EPS is expected to be in the lower $0.70 range, with the company confident in margin momentum in the second half supported by in-market volume recovery and productivity. The company expects continuing margin expansion in both Meals & Beverages and Snacks, targeting roughly 15% Snacks margin for FY24 and approximately 17% by the end of FY26, with roughly 100 bps of margin expansion per year in the next few years.
- Capital allocation and acquisitions: Sovos Brands acquisition is expected to close the week of March 11, 2024; management indicated they would update guidance for the combined business on the Q3 call.
- Structural catalysts: Ongoing cost savings (target of $1.0 billion by end of FY2025), ongoing supply-chain productivity, and a robust innovation pipeline are anticipated to support margin and growth as inflation moderates. Investors should monitor: (i) progress toward Sovos integration, (ii) execution of the DSD / combo-route pilots, (iii) trajectory of at-home consumption trends and foodservice recovery, and (iv) the pace of pricing/mix leverage in a moderating inflation environment.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CPB Focus
31.60%
12.90%
5.27%
16.07%
GIS
34.40%
15.80%
6.35%
15.48%
HRL
17.40%
8.74%
2.40%
25.63%
K
36.40%
15.40%
10.40%
14.34%
LW
27.50%
17.60%
12.90%
16.79%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Campbell remains a high-quality, defensive consumer staples franchise with improving earnings power and a clear path to higher margins through its Snacks margin expansion and the Sovos integration. The combination of a differentiated, growth-oriented portfolio (Meals & Beverages with Raoâs and Pacific Foods; Snacks with Goldfish, Lance, Kettle Brand) and a scalable route-to-market transformation provides multiple levers for margin and volume improvement over the next two years. The primary near-term overhang is the speed of category stabilization and the integration of Sovos; however, the companyâs disciplined capital allocation, strong cash generation, and a robust innovation pipeline support a constructive long-term investment thesis. Investors should monitor the Sovos close, the performance of the DSD combo-route pilots (targeting ~20% of Snacks routes), and the cadence of volume/mix improvements in Q3 and Q4 as signals of revenue and margin trajectory.
Key Investment Factors
Growth Potential
Catalysts include: (i) Sovos Brands portfolio integration (Raoâs and Pacific Foods), (ii) continued dominance and expansion of Goldfish and other power brands, (iii) margin upside from Snacksâ margin roadmap (target ~17% by FY26) and 50 bps of near-term distribution savings from Snacks routing optimization, and (iv) potential accretion from combined top-line growth post-Sovos with a broader, more diversified portfolio.
Profitability Risk
Key risks include: (i) slower-than-expected category stabilization and consumer recovery, (ii) input cost inflation or commodity price volatility, (iii) execution risk in the Sovos integration and in the DSD optimization program, (iv) competition-driven pricing pressure in the Snacks space, (v) macroeconomic weakness affecting consumer discretionary spend, and (vi) potential integration hurdles or timing risk related to the Sovos acquisition.
Financial Position
Healthy cash generation with $510 million operating cash flow in H1 and $169 million cash at period end; net debt $4.351 billion and net debt/adjusted EBITDA of 2.6x. Adequate liquidity ($1.85B available under revolver) supports the Sovos close and growth investments. The company remains committed to a disciplined capital-allocation framework including dividend payments and selective buybacks and remains on track to deliver $1B of cost savings by FY2025.
SWOT Analysis
Strengths
Diversified, iconic portfolio with stable cash flows across Meals & Beverages and Snacks
Strong brand equity, including Goldfish (now >$1B in net sales) and Raoâs anticipated integration benefits
Robust free cash flow and solid balance sheet with 2.6x net debt to adjusted EBITDA
Strategic Sovos Brands acquisition could unlock meaningful top-line growth and category leadership
Weaknesses
Operating margins lag peers (CPB ~12.9% vs peers like GIS ~15.8% and MKC ~14.2â15% range)
Top-line sensitivity to consumer demand and inflation, with Q2 organic net sales down 1%
Significant integration risk and execution dependency on the Sovos acquisition and DSD optimization
Opportunities
DSD consolidation and âcombo routesâ could yield material efficiency and service improvements across Snacks
Expansion into Canada and foodservice channels leveraging Sovos assets
Franchise-like growth from premium/ differentiated brands and limited-time offerings
Sequential margin expansion driven by productivity, pricing discipline, and cost savings
Threats
Macro headwinds: inflation, consumer sentiment weakness, and shopping-flare effects
Competitive intensity and pricing pressures in salty/snacks categories
Regulatory and supply chain disruptions that could impact cost structure or go-to-market efficiency