Campbell's (CPB) lowered its full-year forecast following a "challenging" fiscal Q2, as macro and consumer headwinds continue to pressure performance, RBC Capital Markets said in a note Thursday.

The company lowered its fiscal 2025 outlook, now expecting adjusted EPS of $2.95 to $3.05, down from its prior range of $3.12 to $3.22. The company also revised its full-year net sales growth forecast to 6% to 8%, compared with its previous outlook of 9% to 11%.

Campbell's reported fiscal Q2 adjusted earnings of $0.74 per share, slightly above analyst expectations of $0.72, but revenue of $2.69 billion came in below the consensus estimate of $2.74 billion.

RBC said ongoing weakness in the Snacks segment remains a concern, with volume and mix declining by 2%, and management now expects a smaller contribution from this segment in the second half.

The firm noted that gross margins declined by 1% in the quarter. The core business saw a 0.6% drop due to inflation, supply chain costs, and unfavorable pricing, while the Sovos acquisition contributed a 0.4% decline. The Meals & Beverages segment's margins were mostly unchanged, but Snacks margins fell 3.7%, underperforming expectations.

The company's management is working on addressing these issues and expects margins to improve in H2 as promotional spending normalizes, according to the note.

"Following a challenging 2024 in which a salty snacks recovery proved sluggish, we remain cautious on Campbell's and packaged food in 2025, as we continue to see a less rosy picture of the operating environment than management," the firm said, adding that the challenging demand environment and uncertainty around recovery may limit investor enthusiasm in the short term.

RBC adjusted its price target on Campbell's to $44 from $51 while keeping its sector perform rating.

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