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Things to Know Ahead of Campbell Soup's (CPB) Q4 Earnings

Campbell Soup's (CPB) Q4 results will likely reflect inflationary headwinds and impacts of Plum baby food and snacks business divestitures, while focu...

This story originally appeared on Zacks

Campbell Soup Company CPB is likely to display year-over-year declines in the top and bottom lines, when it reports fourth-quarter fiscal 2021 numbers on Sep 1. The Zacks Consensus Estimate for revenues is pegged at $1,820 million, suggesting a decrease of 13.7% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for earnings has remained unchanged over the past 30 days at 47 cents per share, which indicates a decline of 25.4% from the figure reported in the prior-year period. In the last reported quarter, the company delivered negative earnings surprise of 13.6%. This manufacturer and marketer of food and beverage products has a trailing four-quarter earnings surprise of 1.2%, on average.

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Campbell Soup Company Price, Consensus and EPS Surprise

Campbell Soup Company Price, Consensus and EPS Surprise

Campbell Soup Company price-consensus-eps-surprise-chart | Campbell Soup Company Quote

Key Factors to Note

Campbell Soup has been struggling with cost inflation for a while. During the third quarter of fiscal 2021, cost inflation (especially freight rate), other supply-chain expenses, adverse mix and reduced operating leverage weighed on the company’s adjusted gross margin. The gross margin bore the brunt of an increasing inflationary landscape, transition into a post-pandemic operating environment, short-term rise in supply-chain expenses and some executional headwinds related to the transformation plan (mainly in the Snacks segment). The company, on its last earning call, said that it expects to encounter continued margin pressure in the fourth quarter due to the transitioning out from the pandemic-led landscape as well as stronger inflation.

Apart from this, tough comparisons with the year-ago period’s initial pandemic-induced demand spike might have impacted the company’s performance. Based on its third-quarter results and impacts from the divestiture of the Plum baby food and snacks business (on May 3), management had revised its guidance for fiscal 2021. Management had also highlighted that fiscal 2020 included an additional week, which was estimated to contribute 2 percentage points to net sales and about 4 cents to the bottom line. For fiscal 2021, the company now expects a 3-3.5% decline in net sales. Adjusted EBIT is envisioned to have declined 4-5%. Adjusted EPS is estimated in the range of $2.90-$2.93, indicating a 1-2% dip from the figure reported in the year-ago period. These factors raise concerns over company’s performance during the quarter under review.

That said, Campbell Soup has been undertaking necessary actions to tide over the inflated cost hurdles, which includes pricing initiatives. Also, the company has been progressing well with its cost-saving plan. Management anticipates annualized savings of $850 million by fiscal 2022-end. These factors, along with Campbell Soup’s brand, strength bode well.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Campbell Soup this time around. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Campbell Soup currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Simply Good Foods SMPL has an Earnings ESP of +1.50% and carries a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale COST has an Earnings ESP of +0.44% and currently holds a Zacks Rank #3.

General Mills GIS has an Earnings ESP of +1.32% and carries a Zacks Rank #3, currently.

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