Is Campbell's (CPB) Q4 Earnings Report a Buying Opportunity Amid Declining Sales and Margin Pressures?

The Campbell's Company (CPB) is poised to release its Q4 2025 earnings on September 3, 2025, amid a backdrop of mixed performance, margin pressures, and a volatile macroeconomic environment. For investors, the question looms: Does the stock's discounted valuation and the strength of its Meals & Beverages segment justify a long-term buy position, despite near-term headwinds from tariffs, inflation, and softening demand in its Snacks division?

Resilience in Meals & Beverages: A Pillar of Stability

Campbell's Meals & Beverages segment has emerged as a critical driver of growth, accounting for roughly half of the company's revenue. In Q3 2025, the division delivered double-digit sales growth, fueled by strong demand for condensed cooking soups, broths, and sauces. The company's “mac and cheese” marketing campaign, which repositioned the product as a versatile ingredient for home cooking, added one million households to its customer base in the third quarter alone. This segment's resilience is tied to broader consumer trends: rising inflation and economic uncertainty have shifted spending toward value-oriented, convenience-focused meal solutions.

The segment's operating margins have also shown discipline, with cost savings from the company's $250 million efficiency program offsetting some of the inflationary pressures. For example, Q3 2025 saw 8% growth in operating earnings for Meals & Beverages, driven by the Sovos Brands acquisition and improved gross margins. This performance underscores the segment's ability to adapt to shifting consumer preferences while maintaining profitability.

Snacks Division: A Persistent Drag

In stark contrast, the Snacks segment has struggled. Q3 2025 saw a 3–6% decline in organic sales, with brands like Goldfish crackers, Snyder's of Hanover pretzels, and Lance sandwich crackers underperforming. The division's challenges stem from softening demand for discretionary snacks, rising input costs, and competition from private-label alternatives. Management has acknowledged the need to recalibrate strategies, including phasing out lower-margin partner brands and doubling down on innovation. However, these adjustments have yet to translate into meaningful sales recovery.

The Snacks division's operating earnings dropped 13% in Q3 2025, reflecting margin compression from higher tariffs on imported ingredients and elevated administrative costs. With tariffs expected to add an incremental $0.03–$0.05 per share drag in fiscal 2025, the segment's near-term outlook remains clouded.

Valuation Metrics: A Discounted Opportunity?

Campbell's current valuation appears attractive on paper. As of August 2025, the stock trades at a P/E ratio of 21.13–21.43, below its 10-year historical average of 24.79 and significantly lower than the S&P 500's average P/E of 25. The company's 4.9% dividend yield, bolstered by a recent raise, further enhances its appeal for income-focused investors.

However, the P/B ratio remains undisclosed in the latest data, and the stock's 36% decline over the past year suggests lingering skepticism about its ability to navigate macroeconomic risks. While the discounted valuation may reflect undervaluation, it also signals investor concerns about the company's long-term growth trajectory, particularly in the Snacks segment.

Strategic Adjustments and Cost Discipline

Campbell's management has emphasized cost discipline as a key lever to mitigate margin pressures. The company's $250 million cost-savings initiative, which has already delivered $110 million in savings by Q3 2025, is expected to provide further relief in fiscal 2025. Additionally, the divestiture of lower-margin businesses like Pop Secret popcorn and noosa yoghurt has streamlined the portfolio, allowing the company to focus on high-margin power brands.

The Meals & Beverages segment's strong brand equity and recurring demand position it as a long-term growth engine. For instance, the Swanson broth business has seen robust share gains, and Rao's pasta sauces are projected to deliver high single-digit growth in 2025. These strengths could offset the Snacks division's underperformance over time, particularly if the company successfully executes its innovation pipeline.

Risks and Considerations

The primary risks for Campbell's include:
1. Tariff and Inflationary Pressures: New tariffs on food ingredients could further erode margins, particularly in the Snacks segment.
2. Consumer Spending Shifts: Prolonged economic uncertainty may dampen demand for discretionary snacks, even as meals remain a staple.
3. Execution Risks: The Snacks division's turnaround hinges on successful innovation and brand repositioning, which are not guaranteed.

Investment Thesis: A Long-Term Buy with Caution

For long-term investors, Campbell's offers a compelling case. The Meals & Beverages segment's resilience, combined with a discounted valuation and attractive dividend yield, creates a margin of safety. The company's focus on value-oriented meal solutions aligns with enduring consumer trends, and its cost discipline provides a buffer against macroeconomic volatility.

However, near-term headwinds—particularly in the Snacks division—warrant caution. Investors should monitor the Q4 earnings report for signs of stabilization in the Snacks segment and the effectiveness of cost-saving measures. A positive earnings surprise, particularly in Meals & Beverages, could catalyze a re-rating of the stock.

Final Verdict: While the path to growth is not without risks, Campbell's discounted valuation and the strength of its core meal business justify a long-term buy position for investors with a 3–5 year horizon. Those seeking immediate upside may need to wait for clearer signals post-Q4, but the fundamentals suggest the company is well-positioned to navigate the current challenges and deliver value over time.