Edgen Stock·Sep 08 2025, 08:15
The Campbell’s Company forecasts a significant 12-18% decline in adjusted earnings per share for fiscal year 2026, primarily due to the impact of steel, aluminum, and IEEPA tariffs on its cost of products sold. The company is implementing mitigation strategies, but analysts remain divided on the outlook.
Campbell Soup Projects 2026 Earnings Reduction Amid Tariff Headwinds
The Campbell’s Company (NYSE: CPB) announced a projected decline in its adjusted earnings per share (EPS) for fiscal year 2026, forecasting a significant reduction of 12% to 18%. This downturn is primarily attributed to increased costs stemming from Section 232 tariffs on steel and aluminum, as well as tariffs imposed under the International Emergency Economic Powers Act (IEEPA).
The Event in Detail
The company’s fiscal 2026 guidance indicates that gross tariffs are expected to account for approximately 4% of the cost of products sold. Of this, roughly 60% originates from the Section 232 steel and aluminum duties, which directly impact the cost of manufacturing soup cans. The remaining portion is largely due to global IEEPA tariffs, affecting imports such as Rao’s sauces from Italy. This tariff burden is a key factor in the anticipated two-thirds reduction of adjusted EPS for the upcoming fiscal year.
In addition to the EPS forecast, Campbell’s projects full-year reported net sales for fiscal 2026 to be down 2% to flat, while adjusted EBIT is expected to decline between 9% and 13%.
Analysis of Market Reaction
Despite a resilient performance in fiscal 2025, where Campbell’s reported net earnings of $602 million, a 6% increase from the prior year, and net sales rising 6% to $10.25 billion (partially driven by the acquisition of Sovos Brands), the outlook for 2026 presents a stark contrast. The company faces a substantial challenge in mitigating the ongoing tariff impacts.
Campbell’s has outlined a strategy to mitigate approximately 60% of the projected tariff impact. This includes a multi-pronged approach involving inventory management, collaboration with suppliers, exploring alternative sourcing opportunities, and enhancing productivity. The company also intends to implement "surgical and responsible pricing actions" where deemed absolutely necessary.
Furthermore, Campbell’s has increased its long-term cost savings target from $250 million to $375 million by fiscal year 2028, with $145 million already realized in fiscal 2025. To support top-line growth and brand awareness, marketing investment is projected to increase to 9% to 10% of net sales.
However, the remaining 40% of the tariff impact, combined with rising raw material costs, is expected to weigh heavily on margins. The necessity to import key raw materials like steel and aluminum due to insufficient domestic supply, coupled with a 50% tariff on such imports, underscores the structural nature of these cost pressures.
Broader Context and Implications
The challenges faced by Campbell’s highlight a broader vulnerability within the Food Sector and Consumer Staples Sector to global trade policies and tariffs. These external factors can significantly influence profitability and investor confidence.
From a valuation perspective, Campbell’s stock (CPB) was trading at $33.07 as of September 4, 2025, below its estimated fair value. Its Price-to-Earnings (P/E) ratio of just over 11x is notably lower than its five-year average of 15x and the broader packaged food sector average of 16x, suggesting a potential market discount reflecting current headwinds.
Expert Commentary
Analysts remain divided on Campbell’s future trajectory. CFRA has revised its 2026 EPS estimate downwards to $2.47 from $2.99, citing persistent cost pressures. Conversely, others, such as Bernstein SocGen, have raised their price targets to $39, expressing optimism regarding Campbell’s capacity to adapt and execute its mitigation strategies.
Looking Ahead
The path to recovery for Campbell’s in fiscal 2026 will largely depend on external factors such as shifts in trade policy and the normalization of input costs. The company’s strategic focus on operational excellence, disciplined cost management, and continued investment in its leading brands, particularly within the Meals & Beverages segment, aims to stabilize performance. The Snacks division is also anticipated to show stabilization in the latter half of fiscal 2026. Investors will closely monitor the effectiveness of Campbell’s mitigation efforts and the broader evolution of global trade dynamics as key determinants of the company’s financial performance in the coming quarters.
