Campbell Soup Company (CPB Quick QuoteCPB - Free Report) is trading at an attractive valuation, considering its price-to-earnings (P/E) multiple, which is lower than both the Zacks Food – Miscellaneous industry and the broader Consumer Staples sector. CPB’s forward 12-month P/E ratio is 14.70, lower than the industry average of 16.41 and the sector average of 18.12.

This discrepancy in valuation suggests that the stock may be undervalued relative to its peers, presenting a compelling opportunity for investors seeking value in the consumer staples space. With a Value Score of B, Campbell Soup strengthens its investment appeal, reflecting a favorable risk-reward profile.

Campbell Soup has outperformed the broader sector, reflecting its steady performance amid macroeconomic uncertainty. Shares of CPB have risen 9.2% in the past six months compared with the industry and Zacks Consumer Staples sector’s growth of 0.3% and 7.4%, respectively.  Investors may find this combination of value and sector outperformance a good reason to consider Campbell Soup as a long-term investment opportunity.

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What’s Driving CPB’s Momentum?

The company is focused on prioritizing execution, innovation and strong collaboration with retail partners to stay relevant and succeed by delivering both quality and value. The improving trends in market share and volumes, despite a dynamic operating landscape, are encouraging. On its first-quarter fiscal 2024 earnings call, management stated that it has optimized its strategies and plans, focusing on three key areas. These areas include ensuring product affordability and maintaining competitive pricing within the boundaries of margin goals, sustaining marketing and innovation initiatives and adhering to a disciplined and balanced spending approach with a focus on high return on investment and impactful plans.

CPB’s Meals & Beverages division continues to be a bright spot, showing 1% growth in organic net sales during the fourth quarter of fiscal 2024, driven by a 2% volume increase. This was a result of both legacy Campbell's products and the successful integration of Sovos Brands. Consumer demand remained solid across the portfolio, with core brands like Rao's and Prego performing well. Rao’s saw in-market consumption growth in the high teens, while the Soup business exhibited resilience, with strong dollar consumption gains as consumers favored at-home dining. These results signal the division's strength and its potential to contribute meaningfully to Campbell Soup’s long-term growth.

Campbell Soup has also been progressing well with its cost-savings plan. The company’s strategy of concentrating on supply-chain efficiencies, along with curtailing costs and reinvesting part of these savings in areas with high-growth potential, is noteworthy. Through the fourth quarter of fiscal 2024, Campbell Soup generated $950 million in savings under its $1 billion multi-year cost-saving program.

CPB’s Portfolio-Reshaping Moves Deserve Mention

Campbell Soup's recent acquisitions and divestitures demonstrate a proactive approach to enhancing its market position and profitability. The company acquired Sovos Brands in March 2024 and is reaping impressive gains from its addition. The company’s reported sales witnessed an 11% rise in the fourth quarter of fiscal 2024, attributed to the buyout of Sovos Brands. Through the fourth quarter of fiscal 2024, the company generated cost synergies of $10 million related to the Sovos Brands integration plan. The performance of Sovos Brands, particularly Rao's, has been outstanding, with sales growing faster than expected. Management remains confident about the long-term sales growth of Sovos Brands, expecting it to be in the mid-single-digit range. 

Campbell Soup concluded the divestiture of its Pop Secret popcorn business in August 2024, which reflects its strategic focus on refining its Snacks portfolio. While Pop Secret is recognized as a strong player in the microwave popcorn segment, the brand does not align with the company’s core objectives for the Snacks division. Although the divestiture will have a modest impact on net sales and earnings per share in the near term, management is optimistic that this move will facilitate a more concentrated approach toward its power brands.

Campbell Soup: Risks to Watch

Campbell Soup continues to navigate a challenging consumer environment marked by fragile consumer confidence, which saw a modest decline in the fourth quarter. Although consumer behavior showed signs of improvement among lower- and middle-income households, the recovery remains uneven. Inflationary pressures and economic uncertainty continue to weigh on consumer spending patterns, leading to mixed in-market performance. While Campbell Soup is optimistic that consumer confidence will eventually stabilize, the company remains cautious in its fiscal 2025 guidance, reflecting the ongoing uncertainty surrounding consumer behavior and its impact on future sales.

Campbell Soup’s Snacks business faced notable challenges in the fourth quarter, with organic net sales declining 3% year over year, driven by competitive pressures in the salty snacks segment. This pressure stemmed from new market entrants in premium categories, such as organic tortilla chips and kettle-style potato chips. While the company remains committed to growing its premium snack brands, including Kettle and better-for-you offerings, progress has been slower than expected. 

Campbell Soup has devised targeted strategies to address competitive threats in the upcoming fiscal year, focusing on innovation and enhanced marketing efforts to regain share and drive long-term growth.
The company also remains focused on managing areas of its portfolio affected by the rising cost of inputs, including olive oil, cocoa and packaging, as well as ongoing inflation in labor and warehousing expenses. CPB’s ability to balance inflationary pressures with its strategic goals will be critical in maintaining its trajectory toward growth.

Investor Strategy for CPB Stock

While Campbell Soup has demonstrated resilience through strategic initiatives, market share gains and cost-saving efforts, it continues to face challenges in the broader consumer landscape. The company’s focus on innovation, portfolio reshaping and maintaining affordability positions it well for long-term growth, though headwinds such as inflationary pressures and competitive threats in the snacks segment remain areas to watch. Investors seeking value may find CPB's current valuation and steady performance appealing, but the company’s ability to navigate economic uncertainty and execute its strategic goals will be the key to sustaining momentum. CPB currently carries a Zacks Rank #3 (Hold).

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