Campbell's (CPB)

Packaged food company Campbell's (NASDAQ:CPB) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 1.2% year on year to $2.32 billion. Its non-GAAP profit of $0.62 per share was 8.8% above analysts’ consensus estimates.

Company Overview

With its iconic canned soup as its cornerstone product, Campbell's (NASDAQ:CPB) is a packaged food company with an illustrious portfolio of brands.

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Competitors in packaged food include Mondelez (NASDAQ:MDLZ), Kraft Heinz (NASDAQ:KHC), and Nestle (SWX:NESN).

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $10.25 billion in revenue over the past 12 months, Campbell's is one of the larger consumer staples companies and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because there are only a finite number of major retail partners, placing a ceiling on its growth. To expand meaningfully, Campbell's likely needs to tweak its prices, innovate with new products, or enter new markets.

As you can see below, Campbell's grew its sales at a mediocre 6.2% compounded annual growth rate over the last three years as consumers bought less of its products. We’ll explore what this means in the "Volume Growth" section.

This quarter, Campbell's grew its revenue by 1.2% year on year, and its $2.32 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to decline by 2.8% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and suggests its products will face some demand challenges.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Campbell's generated its growth (or lack thereof) from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Campbell’s average quarterly sales volumes have shrunk by 1%. This isn’t ideal for a consumer staples company, where demand is typically stable.

In Campbell’s Q2 2025, sales volumes dropped 4% year on year. This result represents a further deceleration from its historical levels, showing the business is struggling to move its products.

Campbell’s unit economics are higher than the typical consumer staples company, giving it the flexibility to invest in areas such as marketing and talent to reach more consumers. As you can see below, it averaged a decent 31% gross margin over the last two years. Said differently, Campbell's paid its suppliers $69.02 for every $100 in revenue.

Campbell’s gross profit margin came in at 30.4% this quarter, in line with the same quarter last year and analysts’ estimates. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Campbell’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 10.7% over the last two years. This profitability was higher than the broader consumer staples sector, showing it did a decent job managing its expenses.

Looking at the trend in its profitability, Campbell’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q2, Campbell's generated an operating margin profit margin of 11.6%, up 8.2 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

In Q2, Campbell's reported adjusted EPS of $0.62, down from $0.63 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 8.8%. Over the next 12 months, Wall Street expects Campbell’s full-year EPS of $2.98 to shrink by 13.3%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Campbell's has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.9% over the last two years, slightly better than the broader consumer staples sector.

Campbell’s free cash flow clocked in at $129 million in Q2, equivalent to a 5.6% margin. This cash profitability was in line with the comparable period last year but below its two-year average. In a silo, this isn’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Campbell’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 11.1%, slightly better than typical consumer staples business.

Campbell's reported $132 million of cash and $6.86 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.87 billion of EBITDA over the last 12 months, we view Campbell’s 3.6× net-debt-to-EBITDA ratio as safe. We also see its $158 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Campbell's beat analysts’ EPS expectations this quarter despite in-line revenue. On the other hand, its full-year EPS guidance fell short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock traded up 1.2% to $31.82 immediately following the results.

Updated: December 4, 2025 at 9:41 PM EST

Before deciding whether to buy Campbell's or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Campbell's falls short of our quality standards. To begin with, its revenue growth was mediocre over the last three years, and analysts expect its demand to deteriorate over the next 12 months. And while its favorable brand awareness gives it meaningful influence over consumers’ dining decisions, the downside is its projected EPS for the next year is lacking. On top of that, its shrinking sales volumes suggest it’ll need to change its strategy to succeed.

Campbell’s P/E ratio based on the next 12 months is 12.2x. While this valuation is fair, the upside isn’t great compared to the potential downside. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $34.26 on the company (compared to the current share price of $29.32).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.