Executive Summary
Campbell Soup Company delivered a solid Q3 2024 despite a mixed macro backdrop and the ongoing integration of Sovos Brands. Reported revenue of $2.37 billion reflected a 14.6% year-over-year lift, supported by the partial quarter contribution from Sovos. Organic net sales were roughly flat versus the prior year, aided by volume improvements and strength in unmeasured channels (notably foodservice and Canada). The acquisition contributed meaningfully to operating profit growth, with adjusted EBIT up double digits and adjusted EPS of $0.75—roughly neutral to acquisitions on a quarterly basis and ahead of initial expectations. Margin momentum improved, as adjusted gross margin expanded 30 basis points to 31.2%, even as Sovos introduced a lower-margin contribution. Campbell’s continues to advance its strategic Rao’s and Noosa initiatives post-Sovos, reinforcing a billion-dollar sauce franchise and broadening growth vectors across meals, snacks, and frozen categories. Balance-sheet health remains solid on a cash-flow basis but leverage rose post-acquisition, guiding the company to pursue the targeted cost-savings program and deleveraging plan. The Q3 results underpin a cautiously optimistic near-term outlook: organic net sales are expected to be flat-to-down roughly 1% for the year with sequential improvement into Q4, double-digit adjusted EBIT and EPS growth in Q4, and an annual adjusted EPS target of $3.07–$3.10. The longer-term growth runway centers on Rao’s penetration, distribution expansion, ongoing cost synergies, and expansion of power brands within Snacks, with Investor Day in September set to outline more detailed plans. Risks to the favorable thesis include a slower-than-anticipated consumer recovery, ongoing inflationary pressure, and integration execution risk across a broader portfolio.
Key Performance Indicators
QoQ: -21.77% | YoY:-8.82%
QoQ: -34.48% | YoY:-21.30%
QoQ: -33.82% | YoY:23 584.21%
Key Insights
Revenue and profitability: Q3 revenue of $2.37B, up 14.6% YoY and -3.54% QoQ; gross profit $732M with gross margin 30.9%; operating income $248M (operating margin 10.47%); net income $133M (net margin 5.61%); diluted EPS $0.44; basic EPS $0.45. Cash flow and capital allocation: net cash provided by operating activities $213M; capex $113M; free cash flow $100M; cash balance end of period $107M; dividends paid $110M; share repurchases $17M; debt and leverage: total debt $7.18B; cash and equivalent...
Financial Highlights
Revenue and profitability: Q3 revenue of $2.37B, up 14.6% YoY and -3.54% QoQ; gross profit $732M with gross margin 30.9%; operating income $248M (operating margin 10.47%); net income $133M (net margin 5.61%); diluted EPS $0.44; basic EPS $0.45. Cash flow and capital allocation: net cash provided by operating activities $213M; capex $113M; free cash flow $100M; cash balance end of period $107M; dividends paid $110M; share repurchases $17M; debt and leverage: total debt $7.18B; cash and equivalents $107M; net debt $7.072B; net debt to adjusted EBITDA 3.9x. Balance sheet and assets: total assets $15.24B; total liabilities $11.328B; total stockholders’ equity $3.913B; goodwill and intangible assets $9.947B (reflecting Sovos integration). Guidance and outlook: full-year net sales +3% to +4%; organic net sales around flat to down ~1% (midpoint); Q4 adjusted EBIT growth to be double-digit; full-year adjusted EPS target $3.07–$3.10; full-year cost savings $55–$60M; capex ~$500M; full-year adjusted net interest expense ~$245M.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
2.37B |
14.56% |
-3.54% |
| Gross Profit |
732.00M |
11.59% |
-5.67% |
| Operating Income |
248.00M |
-8.82% |
-21.77% |
| Net Income |
133.00M |
-21.30% |
-34.48% |
| EPS |
0.45 |
23 584.21% |
-33.82% |
Key Financial Ratios
operatingProfitMargin
10.5%
operatingCashFlowPerShare
$0.72
freeCashFlowPerShare
$0.34
dividendPayoutRatio
82.7%
Management Commentary
Themes from management commentary on the earnings call: 1) Strategy and integration: management emphasized the Sovos Brands integration is off to a fantastic start, with no material impact on adjusted EPS and pro forma top-line growth of roughly 200 bps in Q3. Mark Clouse described ongoing benefits as the combination drives faster growth and margin expansion, with an Investor Day planned for September to delineate the growth framework. 2) Consumer environment and category dynamics: management noted a stabilizing consumer environment with improving volumes and a gradual recovery in Meals & Beverages as prices normalize; Snacks experienced near-term pressure among lower- and middle-income consumers but showed improvements in the latest weeks. 3) Rao’s and Noosa trajectory: Rao’s penetration exceeded expectations and is driving faster growth among younger consumers; Noosa, while not a strategic category for Campbell’s, delivered meaningful performance and a return to dollar growth in spoonable yogurt. 4) Margin and cost savings: adjusted gross margin expanded 30 bps to 31.2% in Q3, with synergy-driven cost savings contributing to EBIT growth; the company expects $50M of annualized synergies from Sovos by the end of year two. 5) Outlook and volatility management: Campbell’s highlighted core inflation in the low single digits and reaffirmed guidance, while acknowledging the dynamic macro environment and the importance of maintaining price discipline and innovation to protect margins and share.
We had a solid third quarter with sequential volume improvement, stable organic net sales, double digit year-over-year adjusted EBIT and EPS growth while expanding margins.
— Mark Clouse
Rao's is exceeding our expectations regarding household penetration and that we're seeing faster growth among younger consumers.
— Mark Clouse
Forward Guidance
Campbell’s reaffirmed and updated guidance for fiscal 2024: total net sales up approximately 3–4% on a reported basis, driven by a partial-year contribution from Sovos Brands; organic net sales expected to be roughly flat to down 1% (midpoint). Fourth-quarter organic net sales are projected to moderately increase versus Q3, with a low-teens pro forma net sales contribution from Sovos in Q4 due to timing. Full-year adjusted EBIT growth forecasted at roughly 6.5%–7%, incorporating integration savings and base-business improvements; fourth quarter is expected to deliver double-digit adjusted EBIT growth. Full-year adjusted EPS guidance is $3.07–$3.10, with approx. $0.01–$0.02 of dilution from Sovos. Annual depreciation and amortization related to the acquisition is expected in the $15–$20M range. The company also targets $55–$60M of cost savings from the $1B enterprise-wide program in 2024 and about $50M of annualized cost synergies by the end of year two post-close. Key monitoring factors for investors include the pace of consumer recovery by segment, the trajectory of snacks and soups volume, the realization of Sovos synergies, and the progression toward deleveraging toward a 3.0x net debt to EBITDA target by year three post-close.