EPS of $0.58 decreased by 14.7% from previous year
Gross margin of 30.5%
Net income of 173.00M
"We updated our full year guidance to reflect the slower than anticipated recovery of our snacking categories impacting the outlook for the second half." - Mick Beekhuizen
Campbell Soup Company (CPB) QQ2 2025 Results Analysis: Sovos-Driven Net Sales Growth, Snacks Margin Headwinds, Rao's Acceleration, and Updated Full-Year Guidance
Executive Summary
Campbell Soup Company delivered a solid top-line contribution from the Sovos acquisition in Q2 FY2025, with reported net sales up 9% to $2.685 billion. Organic net sales declined 2% as growth from Meals & Beverages and the Sovos addition contrasted with weaker snacking categories. Volumes remained flat for the quarter, marking the fourth consecutive period of flat or higher volume. Adjusted EBIT rose 2% year over year, while adjusted EPS of $0.74 reflected higher interest expense from elevated debt post-acquisition. Management updated full-year guidance to reflect a slower-than-expected snacking recovery: organic net sales projected to be down 2% to flat, with reported net sales up about 6%â8% and adjusted EPS of $2.95â$3.05, inclusive of the noosa divestiture impact. The company is accelerating cost savings (raised guidance to $120 million) and remains committed to expanding leadership-brand growth, Rao's expansion, and margin discipline across Snacks and Meals & Beverages. Balance sheet health remains solid, with a net debt to adjusted EBITDA of ~3.7x at quarter-end and substantial liquidity, as Campbell navigates ongoing macro headwinds, tariff considerations, and category dynamics in snacking.
Key Performance Indicators
Revenue
2.69B
QoQ: -3.14% | YoY:9.32%
Gross Profit
819.00M
30.50% margin
QoQ: -5.54% | YoY:5.54%
Operating Income
327.00M
QoQ: -10.90% | YoY:3.15%
Net Income
173.00M
QoQ: -20.64% | YoY:-14.78%
EPS
0.58
QoQ: -20.55% | YoY:-14.71%
Revenue Trend
Margin Analysis
Key Insights
Revenue (Q2 FY2025): $2.685 billion; YoY growth 9.32%; QoQ change not disclosed in the data snapshot, but organic net sales were down 2% excluding Sovos, divestitures, and currency effects.
Gross Profit: $819 million; gross margin 30.50%; YoY gross profit up 5.54%; QoQ change -5.54% in gross profit.
Net Income: $173 million; net margin 6.44%; YoY net income down 14.78%; QoQ -20.64%.
Earnings per Share (EPS): $0.58 (GAAP and basic/diluted); YoY EPS -14.71%; QoQ -20.55%.
Financial Highlights
Revenue and profitability highlights:
- Revenue (Q2 FY2025): $2.685 billion; YoY growth 9.32%; QoQ change not disclosed in the data snapshot, but organic net sales were down 2% excluding Sovos, divestitures, and currency effects.
- Gross Profit: $819 million; gross margin 30.50%; YoY gross profit up 5.54%; QoQ change -5.54% in gross profit.
- Operating Income: $327 million; operating margin 12.18%; YoY operating income +3.15%; QoQ -10.90%.
- Net Income: $173 million; net margin 6.44%; YoY net income down 14.78%; QoQ -20.64%.
- Earnings per Share (EPS): $0.58 (GAAP and basic/diluted); YoY EPS -14.71%; QoQ -20.55%.
- EBITDA: $437 million; EBITDA margin ~16.28%.
- Cash flow and liquidity: Net cash provided by operating activities $512 million; free cash flow $411 million; cash at end of period $829 million; net debt $6.846 billion; cash and revolver liquidity of $1.85 billion available under credit facility.
- Leverage and coverage: Net debt to adjusted EBITDA 3.7x; interest coverage 3.72x; current ratio 0.93x; quick ratio 0.56x; debt-to-capitalization 0.66x; payout ratio 0.642 (64.2%).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.69B
9.32%
-3.14%
Gross Profit
819.00M
5.54%
-5.54%
Operating Income
327.00M
3.15%
-10.90%
Net Income
173.00M
-14.78%
-20.64%
EPS
0.58
-14.71%
-20.55%
Key Financial Ratios
currentRatio
0.93
grossProfitMargin
30.5%
operatingProfitMargin
12.2%
netProfitMargin
6.44%
returnOnAssets
1.09%
returnOnEquity
4.42%
debtEquityRatio
1.96
operatingCashFlowPerShare
$1.72
freeCashFlowPerShare
$1.38
dividendPayoutRatio
64.2%
priceToBookRatio
3.05
priceEarningsRatio
17.22
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights and themes from the earnings call:
- Growth and strategy: CEO Mick Beekhuizen emphasized the Sovos acquisition underpinning the 9% reported net sales growth and highlighted Rao's as a key growth engine with potential to become a next $1 billion brand. He stated, 'Rao's becoming our next $1 billion brand.'
- Snacks margin discipline and near-term path: The team acknowledged Snacks margin underperformance in Q2 due to mix and headwinds in the Fresh Bakery network, with a plan to improve sequentially through Q3 and Q4 as promotions normalize and costs stabilize.
- Guidance and cadence: Carrie Anderson outlined updated full-year guidance reflecting a slower snacking recovery: organic net sales down 2% to flat, adjusted EBIT growth 3%â5%, and adjusted EPS of $2.95â$3.05, with no tariff impact assumed in guidance. Mick noted a mid-point EPS reduction mainly tied to Snacks margin and topline changes, with seeds of improvement expected in the second half.
- Brand and portfolio execution: The leadership-brand strategy remains intact with roughly 90% of Enterprise net sales from Leadership Brands; focus on Pepperidge Farm, Goldfish, Rao's, Prego, and Swanson as pivotal platforms. The team signaled ongoing investments in price-pack architecture and marketing to defend share in a challenging environment.
- Balance sheet and cash flow emphasis: The company highlighted strong operating cash flow generation and the ongoing objective to delever toward its 3x net leverage target by FY27, aided by Sovos and divestiture proceeds (noosa).
We updated our full year guidance to reflect the slower than anticipated recovery of our snacking categories impacting the outlook for the second half.
â Mick Beekhuizen
Rao's becoming our next $1 billion brand.
â Mick Beekhuizen
Forward Guidance
Assessment of the updated outlook: Campbell maintains a constructive long-term path anchored by the Sovos integration, Rao's potential to reach ~$1 billion in annual net sales, and a disciplined cost-savings program. The 2025 guidance envisions: full-year net sales up ~6%â8% (including a ~1-point headwind from the noosa divestiture), organic net sales down 2% to flat (excluding the 53rd week), and adjusted EBIT up 3%â5%. Adjusted EPS guidance is $2.95â$3.05, reflecting no tariff impact assumption and a modest increase in interest expense from higher debt. Management expects Snacks to stabilize in Q4 and for organic topline performance to sequentially improve into 2H FY2025, with a more favorable mix and lower promo intensity post-holiday season aiding margins.
Key factors investors should monitor:
-Snacks category recovery timing and mix effects on margin;/: management guide implies stabilization in Q4, with sequential improvement in H2; sensitive to consumer demand and competitive intensity.
-Private label dynamics and broth headwinds; Sovos contribution transitioning to organic growth in mid-Q3; the broth recovery is a function of private-label recovery and supply-chain efficiency.
-Effectiveness of cost savings and productivity initiatives; target $120 million in savings (up from $90 million) to offset inflationary pressures and support margin expansion.
-Inflation, input costs, and potential tariff impacts; management notes tariffs are fluid, with mitigation strategies under review; tariff actions could pressure input costs and pricing.
-53rd week impact and seasonality; the company expects second-half EPS to be more evenly distributed excluding the 53rd week, with Q4 benefiting from lapping promotional activity and potential mix advantages.
Overall, the trajectory hinges on successful margin normalization in Snacks, continued innovation and brand momentum (notably Rao's), and the durability of cost savings while navigating macro headwinds.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CPB Focus
30.50%
12.20%
4.42%
17.22%
GIS
36.90%
20.60%
8.65%
11.47%
HRL
17.40%
8.74%
2.40%
25.63%
K
36.40%
15.40%
10.40%
14.34%
LW
17.40%
1.16%
-2.21%
-75.93%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Base-case: Campbell achieves mid-range guidance by stabilizing Snacks topline in Q4, leveraging Rao's growth and Sovos profitability, while executing cost savings to offset inflation. Expect gradual margin recovery in Snacks (aiming toward the long-term 17% target) and continued growth in Meals & Beverages. Bearish risks include a slower snacking recovery, tariff-related input-cost pressures, and potential dilution from 53rd week timing. Bull-case drivers include Rao's rapid scale to $1 billion, stronger-than-expected private-label recovery, and effective cost reductions exceeding plan. Overall, the stock warrants a constrained-to-moderate upside case given regulatory, category, and margin volatility, with upside tied to Rao's acceleration and sustained savings execution.
Key Investment Factors
Growth Potential
Robust growth runway from Rao's expansion toward a $1 billion brand; Rao's high awareness and loyalty metrics with a large addressable market, plus ongoing expansion through 10 new sauce products in the last year and millennial adoption outpacing the category.
Profitability Risk
Snacks margin volatility driven by promotional intensity and input costs; mixed strength in the private-label recovery; tariff and regulatory environment risk; potential slower-than-expected holiday-season recovery impacting topline and margin for the second half; reliance on continued success of Sovos integration and efficiency programs to offset inflation.
Financial Position
Strong operating cash flow (YTD $737 million operating cash flow; annualized guidance supports sustained cash generation), leverage elevated by Sovos (~3.7x net debt to adjusted EBITDA) with plan to return to ~3x by FY27, noosa divestiture impact already reflected in guidance, and ample liquidity with $829 million cash and $1.85 billion revolver available.
SWOT Analysis
Strengths
Sovsos acquisition generating reported net sales growth (9% in Q2) and propping up the top line.
Rao's strong brand equity with high awareness, loyalty, and a clear long-term growth runway.
Portfolio breadth with Leadership Brands representing ~90% of enterprise net sales and a diversified Meals & Beverages platform.
Solid free cash flow generation and a disciplined capital allocation approach.
Ongoing cost savings and productivity initiatives targeting offsetting inflation.
Weaknesses
Snacks margin softness (down 370 bps YoY in Q2) due to promotional investment and supply-chain headwinds.
Broth and RTS segments facing private-label headwinds and category headwinds, influencing volumes and margins.
Near-term leverage at elevated levels post-acquisition and 0.93x current ratio indicating tighter liquidity cushions.
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