On Wednesday, Evercore ISI initiated resumed coverage on Campbell Soup Company (NYSE:CPB), assigning an In Line rating and setting a price target of $49.00. The firm's analysis is based on a sum-of-parts evaluation, factoring in various segments of the company's business.
The analyst from Evercore ISI highlighted that Campbell Soup's growth is anticipated to be driven by its Snacks division and the recently acquired Sovos Brands. Snacks, which account for 39% of the company's EBITDA, are expected to see a 7% growth in EBITDA over the next three years. Sovos Brands, representing 10% of EBITDA, is forecasted to experience mid-teens growth in the same period.
The analysis also takes into account the company's Meals & Beverage (M&B) segment, which makes up 51% of EBITDA but is projected to have a flat growth outlook over the next three years. The valuation multiples assigned in the analysis are 9x for the M&B segment, 13x for Snacks, and 14x for Sovos Brands, which has an enterprise value (EV) of $2.8 billion.
Evercore ISI's projections for Campbell Soup include a compound annual growth rate (CAGR) of 4% year-over-year in pro forma EBITDA from 2024 to 2026, with Sovos Brands contributing approximately 1.5 percentage points of this growth. The rating and price target reflect a balance between positive expectations for the Snacks and Sovos segments and the stagnant outlook for the M&B business. The firm's valuation approach considers these varying growth prospects across the company's portfolio.
InvestingPro Insights
As Evercore ISI resumes coverage on Campbell Soup Company (NYSE:CPB) with a positive outlook on its Snacks division and Sovos Brands, it's pertinent to consider some key financial metrics and expert insights that could influence investors' perspectives. Campbell Soup's market capitalization stands at a robust $12.82 billion, reflecting the scale of its operations and market presence. Moreover, the company's commitment to shareholder returns is evident in its impressive record of maintaining dividend payments for 54 consecutive years, a testament to its financial stability and reliability.
Analyzing the company's price to earnings (P/E) ratio provides further insight into its valuation. The adjusted P/E ratio for the last twelve months as of Q2 2024 is 14.47, suggesting a potentially more attractive valuation compared to the current P/E ratio of 16.76. This could indicate a favorable entry point for investors considering the company's long-term profitability, which has been affirmed by analysts who predict Campbell Soup will be profitable this year and have recognized its profitability over the last twelve months.
InvestingPro Tips also highlight that despite recent downward revisions in earnings by 11 analysts for the upcoming period, the overall financial health of Campbell Soup remains solid. This is further supported by a modest revenue growth of 1.02% in the last twelve months as of Q2 2024, showcasing the company's ability to grow despite market challenges.
For investors seeking a comprehensive analysis and additional insights into Campbell Soup's financials and future prospects, InvestingPro offers a wealth of information. There are more InvestingPro Tips available, providing a deeper dive into the company's performance and potential. To access these tips and gain an edge in your investment decisions, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/CPB.
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