What happened
Shares of Campbell Soup Company (CPB -0.09%) dropped on Wednesday after its latest quarterly financial report failed to impress investors. As of 10 a.m. ET, Campbell Soup stock is down about 6%.
So what
This morning, Campbell Soup Company -- maker of soups, snacks, drinks, and more -- reported financial results for its fiscal third quarter of 2023. The period covers February through April for the company. And during this time, it generated net sales of $2.2 billion, which was up 5% year over year (YOY) and met Wall Street's expectations.
Part of the problem for Campbell Soup today is that while net sales were up, sales volume was down. The company has been raising prices to keep up with inflation, leading to fewer sales. And the market doesn't like that.
The market also doesn't like that Campbell Soup apparently didn't raise prices enough. Even though net sales were up 5%, the company's diluted earnings per share (EPS) fell 15%. There are some one-time expenses hurting profitability, including some restructuring. But at the end of the day, investors don't like to see the top line expand while the bottom line shrinks.
Now what
In the previous quarter, Campbell Soup's management raised its full-year guidance. Today, management maintained its guidance, which is a good sign in my opinion. The company still expects over $8.5 billion in net sales for fiscal 2023, which would represent YOY growth of up to 10%. And it's expecting adjusted EPS to grow around 3% -- still slower than sales growth, but growth nonetheless.
Considering it's expecting modest growth in fiscal 2023, I think the downside is limited here for Campbell Soup stock. That said, growth is modest. And without stronger top-line growth or profit margin improvement, the upside for Campbell Soup may be limited as well.
