By Evie Liu

Campbell's is set to post its earnings on Wednesday, marking the first set of financial results since shareholders voted to drop "Soup" from the name at the November annual meeting.

For the first fiscal quarter, ended in October, analysts polled by FactSet expect the packaged-food company to post $2.8 billion in total revenue. That would represent growth of 11% from a year ago, largely as a result of Campbell's acquisition of Sovos Brands in March.

Sovos owns Rao's, a premium pasta sauce that is on track to become Campbell's fourth brand with more than $1 billion of annual sales. The company expects Rao's sales to grow at a percentage in the mid-to-high single-digit range annually for the next three years.

But earnings are expected to come at 87 cents per share, for a decline of more than 4% from the year-earlier period. Campbell's stock has tumbled 12% since Sept. 6, though shares are up 5.3% so far this year.

While some of Campbell's brands are growing fast and achieving high margins, such as Prego pasta sauce, Goldfish crackers, and V8 beverages, many other products have seen softer demand as consumers cut food spending in response to inflation.

In the quarter ended in July, Campbell's organic sales, a number that excludes the impact of acquisitions and divestitures, decreased 1% from the previous year. Sales of snacks fell 3%, while revenue in the meals and beverage business increased 1% from a year earlier as consumers cooked at home more frequently.

Sales of Campbell's canned soups have been soft as consumers trade down to cheaper private labels. At an investor day event in September, management said they expect soup sales to be flat for the next three years.

The company indicated that fiscal 2025, which started in late July, would be challenging. Management said that while it expects organic sales to grow by up to 2% from 2024, two percentage points of the growth will be because the fiscal year includes an extra week. The company expects to see a 1% to 4% gain in earnings per share.

Campbell's view of the macroeconomic environment might still be too optimistic, wrote RBC Capital Markets analyst Nik Modi in a Monday note. Modi said he expects the company to lower its financial guidance this year, and that he is particularly cautious about the snack category.

"While we are optimistic that their new cost savings plan will help improve the company's financial profile, we simply think a demand backdrop that remains challenged with limited clarity on recovery timing will likely temper investor enthusiasm in the near-term," the analyst wrote.

Write to Evie Liu at evie.liu@barrons.com

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December 03, 2024 17:20 ET (22:20 GMT)

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