Tariff-Driven Earnings Pressure at Campbell’s: Is the Stock a Sell or a Strategic Buy in 2026?

The Campbell Soup Company, a titan in the packaged food sector, faces a pivotal test in 2026 as tariffs and input costs threaten to erode its profitability. While the company’s fiscal 2025 results showed resilience—beating earnings per share (EPS) expectations despite a 3% decline in organic net sales—the outlook for 2026 is far grimmer. Analysts project a 12% to 18% drop in adjusted EPS, driven by tariffs accounting for 4% of product costs and retaliatory duties from the EU and Canada [1]. This raises a critical question for investors: Is Campbell’s stock a sell amid these headwinds, or does its long-term strategy justify a strategic buy?

Tariff Impact: A Double-Edged Sword

Tariffs are not a new challenge for Campbell’s, but their scale in 2026 is unprecedented. According to a report by Just-Food, the 4% cost increase from tariffs—60% from Section 232 steel/aluminum duties and the remainder from global IEEPA tariffs—will weigh heavily on margins [1]. The company has mitigated 60% of this impact through supplier collaboration, alternative sourcing, and productivity improvements, but the remaining 40% remains unaddressed. This shortfall, combined with rising raw material costs, is expected to reduce adjusted EPS by two-thirds in 2026, with base business changes accounting for the remaining one-third [4].

The Meals and Beverages division, which includes iconic brands like Campbell’s soup and Rao’s pasta sauces, is particularly vulnerable. Rao’s, produced in Italy, faces additional IEEPA tariffs, compounding the strain on profitability [1]. For investors, this highlights a structural risk: even strong brands cannot fully offset external shocks without strategic adaptation.

Mitigation Strategies: Cost Savings and Marketing Leverage

Campbell’s response to these pressures has been twofold: aggressive cost-cutting and increased marketing investment. The company raised its cost savings target from $250 million to $375 million by fiscal 2028, with $145 million already achieved in 2025 [2]. These savings, coupled with inventory management and selective price increases, aim to cushion the blow of tariffs. However, as Reuters notes, these measures may only delay, not eliminate, the need for structural changes if mitigation falls short [4].

Simultaneously, Campbell’s is doubling down on growth through marketing. The CFO announced plans to increase marketing spend to 9–10% of net sales, a significant shift from prior years [3]. This focus on innovation and brand development—highlighted by the CEO as a strength of leadership brands like Rao’s and Prego—could drive long-term demand, even if near-term sales remain flat [5].

Analyst Outlook: Caution Amid Optimism

Analysts remain divided. CFRA cut its 2026 EPS estimate to $2.47 from $2.99, citing cost pressures [5], while others like Bernstein SocGen raised price targets to $39, betting on Campbell’s ability to adapt [5]. The company’s projected organic net sales decline of 1% to 1% in 2026—a slight improvement from 2025—suggests that its strategies may stabilize the business [4]. Yet, with two-thirds of the EPS drop tied to tariffs, the path to recovery hinges on external factors like trade policy shifts or cost normalization.

Long-Term Resilience: A Calculated Bet

For long-term investors, the key question is whether Campbell’s can transform its cost-saving initiatives into sustainable profitability. The $375 million savings target by 2028, if achieved, could offset a portion of the tariff burden. However, the company’s reliance on price increases—a double-edged sword that risks consumer backlash—adds uncertainty.

Campbell’s brand strength offers a counterbalance. The CEO’s emphasis on innovation and category leadership, particularly in premium segments like Rao’s, signals a pivot toward higher-margin products [5]. If successful, this could insulate the company from some tariff impacts and reinvigorate growth.

Conclusion: Strategic Buy or Sell?

Campbell’s stock is neither a clear sell nor a guaranteed buy. The 2026 EPS forecast of $2.40–$2.55, below the $2.63 average estimate, reflects near-term pessimism [4]. Yet, the company’s proactive cost management, brand resilience, and marketing pivot suggest a path to long-term stability. Investors with a 3–5 year horizon may find value in the stock if it trades at a discount to its intrinsic value, assuming successful execution of its mitigation strategies. For others, the near-term volatility and structural risks may warrant caution.

In the end, Campbell’s story is one of adaptation. Whether it succeeds depends not just on tariffs, but on its ability to innovate and execute in a fragmented market.

Source:
[1] Campbell's expects weighty EPS impact from tariffs [https://www.just-food.com/news/campbells-expects-weighty-eps-impact-from-tariffs-in-new-fiscal-year/]
[2] Campbell Soup Lifts Cost Savings Target [https://www.aol.com/finance/campbell-soup-lifts-cost-savings-161021466.html]
[3] Earnings call transcript: Campbell's Q4 2025 beats EPS expectations [https://www.investing.com/news/transcripts/earnings-call-transcript-campbells-q4-2025-beats-eps-expectations-stock-rises-93CH-4222348]
[4] Campbell's forecasts muted fiscal 2026 on tariff pressures, slow demand [https://www.reuters.com/business/retail-consumer/campbells-forecasts-muted-fiscal-2026-tariff-pressures-slow-demand-2025-09-03/]
[5] Campbell Soup stock price target raised to $37 by CFRA [https://www.investing.com/news/analyst-ratings/campbell-soup-stock-price-target-raised-to-37-by-cfra-on-cost-savings-93CH-4225093]