Q2 Preview: Campbell (CPB) Shareholders on Edge as Increase in Prices May Soon Be Needed

Shares of Campbell Soup Company (NYSE: CPB) closed up nearly 0.7 percent Thursday ahead of the release of its second-quarter results before the opening bell on Friday, February 17th.

The Wall Street quarterly consensus for Campbell Soup is $0.62 per share in earnings on $2.12 billion in sales. During the second quarter of last year, the company reported earnings of $0.71 per share on $2.13 billion in total sales.

The second quarter conference call is scheduled for 10:00 am ET. Dial 1-866-837-9787 for domestic and 1-703-639-1424 for international participants.

According to data from Bloomberg, shares of Campbell Soup have two Buy ratings, 15 Hold ratings and four Sell ratings. The average price target on shares of CPB is $33 with a range from $30 to $36.

Analyst Comments:

• Wells Fargo is slightly bullish on the quarter compared to the Street as it forecasts earnings will total $0.63 per share. The firm also expects a 1 percent increase in organic growth, relatively strong considering a prediction demand for simple meal volumes has declined as a result of heavy promotion in the prior-year period and unseasonably warm weather in much of the U.S.
  
  An analyst at Wells Fargo commented, “We continue to expect FY2012 to be a transition year for Campbell as the company boosts investment in brand building and innovation, reallocates marketing and R&D resources, and attempts to stabilize its core U.S. soup business. Additionally, we believe the turnaround in Campbell’s results may take longer than planned given the recent weakness within U.S. beverages and Arnott's.”
  
  Wells Fargo maintained a Market Perform rating on the stock ahead of the release.
  
  
• Back on January 17th, JPMorgan downgraded the stock from Neutral to Underweight, while cutting its price target from $35 to $30. The firm said the company’s margins at the current level were unsustainable. JPMorgan said the company needs to lower its prices.
  
  An analyst at JPMorgan said, “We recently spoke with soup buyers with large grocers. Their comments, while not surprising, were not necessarily positive for the soup category as a whole. “This is a very price-sensitive category,” one told us, and higher list prices, along with fewer discounts, are preventing previously important price points from being offered on a regular basis. More grocer comments are in the body of this note.”
  
  
• Deutsche Bank anticipates earnings will fall short of expectations by $0.02 for the quarter as core sales and EBIT are estimated to fall 1 percent and 11-12 percent. The company has remained cautious on the stock and noted it will continue to as long as no catalysts are present.
  
  An analyst at Deutsche stated, “We expect investor focus to be primarily on U.S. soup category trends along with competitive dynamics. We also expect questions around pricing vs. elasticity, advertising efficacy, and new product performance. Any updates to the F2012 outlook as well as clarification on FCF priorities will also be of interest.”
  
  Deutsche reaffirmed its Hold rating and $32 price target.

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