Campbell's Q1 FY26 Earnings Preview: Low Bar, Tariff Overhang, and Expensive Protection

1. Market & Expectations

Campbell’s heads into its Q1 FY26 report (results for the quarter ended October 2025) with a stock that’s been de-rated hard and expectations that already bake in a reset year.

Price action & range.
Shares trade around $29.60, essentially hugging the 52-week low near $29 and sitting ~32% below the 52-week high around $44. Short-term, the stock is drifting sideways-to-down: roughly -1–2% over the past month, about -14% over three months, and down ~30% over the past year. The 50- and 200-day moving averages are clustered well above spot in the low–mid $30s, reinforcing a longer-term downtrend and “sell” bias from technical screens.

Valuation & factor profile.
On our snapshot, CPB screens as a cheap defensive:

TTM P/E ~14.8x with EPS around $2.0–2.1.
Price-to-sales just under 1x and price-to-book ~2.5x.
Beta essentially zero (slightly negative in our data), reflecting classic “staples” behavior.
Dividend of $1.56 per year implies a roughly 5.3% forward yield at $29.60.

For a U.S. packaged-food name with mid-single-digit historical revenue growth and mid-teens ROE, this is a discounted multiple versus the broader staples group, consistent with a name in the penalty box over growth and margin worries rather than one priced for perfection.

Consensus & revisions.
Street expectations for Q1 FY26 are deliberately low:

EPS: $0.73 vs $0.89 in the year-ago quarter (≈18% YoY decline).
Revenue: about $2.66B vs ~$2.77B a year ago (≈4% YoY decline).
Q1 is also the first quarter under the new CFO, with investors still digesting a recently lowered full-year FY26 outlook (sales flat to down and EPS down double digits).

The Q1 EPS consensus has drifted down by about a penny over the last month, but not in a dramatic way. At the same time, Campbell’s has quietly built an earnings-beat streak: the company has beaten EPS expectations for several quarters in a row with an average surprise in the mid-single digits.

Recent earnings reactions.
Looking at the last few earnings days:

Q4 FY25 (September 2025): EPS beat with in-line/slightly light revenue and a tariff-heavy outlook; shares still popped roughly 4–7% on the day as the bar was low and profitability surprised to the upside.
Earlier in 2025, 1-day reactions around earnings ranged from about -3% to +7%, with an average absolute move near 3%.

The pattern: Campbell’s often beats on EPS but can see muted or even negative reactions if guidance and volume/mix commentary are cautious. With the stock already down >20% year-to-date, the setup this time is “low bar, low trust.”

Takeaways for expectations.
The Street is modeling declining EPS and revenue despite a cheap multiple, acknowledging tariff and category headwinds. The combination of:

modest downward revisions,
a solid beat track record, and
a stock pinned near 52-week lows

suggests expectations are subdued. The big open question is not Q1 itself, but whether management reiterates, nudges, or cuts the already-lowered FY26 guide.

2. Business & Balance Sheet

Business mix & trends.
Campbell’s is effectively a two-engine story:

Meals & Beverages – Core soups, sauces, and beverages (including Rao’s) leveraged to at-home cooking and value-conscious consumers.
Snacks – Branded snacking (Goldfish, Snyder’s, etc.), which has been softer as consumers rotate and promo intensity increases.

Recent quarters have shown:

Low single-digit revenue growth overall, with price/mix up low single digits but volume under pressure, especially in Snacks.
Meals & Beverages benefiting from more home cooking and “value at home” behavior, partially offset by weaker demand in certain premium sauce and soup SKUs.
Ongoing integration and synergy capture from acquisitions, with cost-savings targets lifted over the medium term.

Heading into Q1 FY26, the incremental headwinds are tariffs and packaging costs. Management has warned of roughly a mid-single-digit cost headwind to COGS from tariffs on inputs like steel and aluminum over the coming fiscal year, with plans to mitigate a majority through supply chain, pricing, and productivity. Those mitigation efforts, plus prior pricing rounds, are the main levers for preserving gross and operating margin.

Profitability & leverage.
On our snapshot:

Gross margin ~31%.
Net margin ~5.9%.
ROE in the mid-teens and ROA in the low-single digits.
Debt-to-equity ~1.6x, with current ratio ~0.77 and quick ratio ~0.25.

This is a levered but manageable balance sheet for a stable staples business, but it does leave less room for error if tariffs and volume softness are worse than expected. The ~5% dividend yield competes with management’s need to preserve balance-sheet flexibility, which is why the market has been quick to punish any sign of weak top-line or another guide cut.

Business skew into Q1.

Into this print, key business drivers look like:

Top line: modest volume elasticity risk in Snacks and premium sauces plus tough comps, supporting the Street’s negative YoY revenue growth assumption.
Margins: price/mix plus cost-savings versus tariffs and input inflation. Even a few tens of bps of upside to gross margin could drive a penny or two of EPS beat.
Tariff narrative: the market already knows tariffs will hurt FY26 EPS; the risk is a more pessimistic update or an earlier-than-expected guide cut.

Our base case: Q1 revenue roughly in line to slightly light versus consensus, but gross margin and EPS a bit better than feared as cost programs and mix offset part of the tariff shock. That supports a small EPS beat even with YoY declines still front and center in the headlines.

3. Options & Sentiment

We use the uploaded options chain (snapshot as of December 5, 2025, with CPB at $29.60) to gauge how the derivatives market is positioned into the December 9 BMO print.

Implied move & volatility

We focus on the December 12, 2025 expiry, the first weekly that fully captures the earnings reaction:

Underlying: $29.60.
ATM strike: $29.50.
Dec 12 29.5 call mid ≈ $0.90, Dec 12 29.5 put mid ≈ $0.80.
Front-week ATM straddle ≈ $1.70, implying an expected move of about 5.7% ($1.70 ÷ $29.60).

Context:

30-day and 90-day realized vol from CPB’s price history are about 24% and 27% annualized, corresponding to a typical 1-day move of ~1.5–1.7%.
The ATM earnings-week options are priced at roughly 51% implied vol, more than 2x recent realized volatility.
Historical data on CPB’s earnings reactions show average 1-day absolute moves around 3–3.5%, while past options markets have typically priced something like ±4.5–5% into earnings.

Conclusion: current pricing for ~±5.7% sits above both realized history and the usual implied move range. The front-week straddle looks rich versus what CPB usually delivers.

Skew, OI walls, and flows

From the Dec 12 expiry:

Skew:
- OTM downside (e.g., 27–28 puts) carries implied vols in the mid-50s, while OTM upside (32+ calls) is closer to the high-40s.
- That is a classic downside vol premium, indicating investors are more willing to pay for protection than upside.
Open interest (all expiries):
- Total call OI ≈ 44.8k, total put OI ≈ 59.6k (put/call OI ratio ≈ 1.33).
Dec 12 OI & volume:
- Calls: ~1,581 OI / ~1,512 volume.
- Puts: ~2,550 OI / ~1,026 volume.
- Put/call OI ratio ≈ 1.6, but volume skew is slightly call-leaning (put/call volume ≈ 0.68).

Strike-level color for Dec 12:

Puts: big OI and volume stacked at $27 and $29, suggesting hedging interest just below spot and further down the ladder.
Calls: heavy activity and OI around $30–32, the first upside band above spot that would be reached on a mid-single-digit pop.

This combination—heavy downside OI, richer downside vol, but short-dated upside call volume picking up into the event—reads like:

Institutions hedged and cautious (long puts across the curve).
Short-term traders and some volatility desks probing for upside with cheap calls, rather than loading up on high-delta calls at the money.

The options market is not euphorically bullish; if anything, it’s slightly tilted to “protection first, upside second.”

Street sentiment & positioning

On the fundamental side:

The average rating is around “Hold/Reduce”, with only a small minority of “Buy” ratings and a cluster of “Hold” and “Sell.”
The average 12-month price target is in the low-mid $30s, implying ~10–15% upside from $29.60, which is modest but not screaming value.
Technical and quant screens lean “Sell” given the downtrend and below-moving-average price action.

Put together:

Options: rich implied move, defensive skew, lots of put OI (especially in nearer expiries), but some opportunistic upside call buying.
Street: cautious with modest upside targets and a wary view on tariffs and snacks.
Price level: valuation cheap and stock already near a multi-year low.

That setup is not a crowded long; if anything, the crowd is braced more for disappointment than surprise upside, while paying up for volatility.

4. Guidance, Direction & Confidence

Here we combine fundamentals, expectations, and options positioning into a directional call on the gap move on December 9.

Scenario map

“Beat & Reassure” (bullish)
- Q1 EPS comes in around $0.74–0.75, revenue roughly in line (maybe a slight top-line miss offset by better margins).
- Management reiterates FY26 guidance (sales flat to down low single digits, EPS down double digits) without another cut, and emphasizes:
  - tariff mitigation,
  - cost-savings tracking ahead of plan, and
  - continued resilience of Meals & Beverages with home cooking tailwinds.
- Tone: cautious but not worse than what’s already in the stock.
- Market reaction: modest multiple re-rate from depressed levels, gap up ~4–6%, with some follow-through selling of inflated front-week vol.
“In-line & Cautious” (mixed to slightly bearish)
- EPS at or just below the $0.73 consensus, revenue slightly light as Snacks and premium sauces continue to drag.
- FY26 commentary leans hard into tariffs and cost pressure; guidance is reaffirmed at the low end of the range with little incremental good news.
- Market reaction: relief that there’s no big cut, but no reason to chase; gap in a ±2–3% band, skewed mildly to the downside as patient sellers use the print to lighten up.
“Guide Cut / Kitchen Sink” (bearish tail)
- New CFO takes the opportunity to reset the bar further, cutting FY26 EPS or widening guidance lower on tariffs and category weakness.
- EPS and revenue may still be close to consensus, but the focus shifts entirely to a lower multi-quarter earnings base.
- Market reaction: renewed skepticism about the dividend and leverage; gap down 7–10%, with vol staying bid rather than collapsing.

Evidence-weighted view

Key inputs:

Beat probability: multi-quarter beat streak, modest downward revision into the print, and a low bar on EPS all support a better-than-consensus bottom line.
Valuation & price level: cheap multiple, ~5% dividend yield, and a stock pinned near 52-week lows argue against aggressive new selling unless guidance is visibly worse.
Skew and options positioning: meaningful downside skew and heavy put OI suggest the crowd is more worried about downside than positioned for upside. If the company merely avoids a new guide cut and delivers a mild EPS beat, there is room for a relief bid and vol crush.
Guidance risk: tariffs and weak snacks are real. Management has already cut the outlook, but investors are still wary of another downgrade, especially with a new CFO.

On balance, we see the most probable path as somewhere between Scenario 1 and the upper end of Scenario 2:

A small EPS beat and no incremental guide cut, with management reiterating the previously lowered FY26 range and emphasizing mitigation efforts.
The market responds with a relief rally from depressed levels, but the move undershoots the ~5.7% priced into the front-week straddle.

Base-case call

Expected result vs consensus: Slight EPS beat, with revenue in line to modestly light.
Expected guidance tone: “Inline” – cautious but not materially worse than the last reset.
Expected gap move: We expect CPB to gap up by roughly 3–4% versus the pre-earnings close, comfortably outside our ±1.5% “flat” band but short of the implied ±5.7%.
Direction & confidence:
- Direction: Up
- Magnitude (absolute): ≈4% (0.04 as a fraction).
- Directional confidence: 0.58 – modest conviction that the gap is more likely up than down, driven by a low bar, cheap valuation, and a market leaning more defensively than speculatively bullish.

We are not calling for a heroic squeeze; this is a low-drama relief move that primarily punishes expensive short-term volatility rather than repricing the long-term story.

5. Trade Framework (Illustrative, Not Advice)

These structures are meant to align with:

Directional view: modest upside gap.
Volatility view: implied move rich vs history and realized.
Risk management: defined risk, earnings-event focused.

All examples reference the Dec 12, 2025 expiry from the uploaded chain and assume CPB around $29.60. Prices are approximate midpoints and will move.

5.1 Directional: Long Call Spread Within Implied Range

Idea: Express a controlled bullish view while respecting that realized moves tend to undershoot the current ±5.7% implied range.

Buy Dec 12 $29.5 call
Sell Dec 12 $32 call

Approximate structure:

Pay roughly $0.70 in net debit (buy ~0.90, sell ~0.22).
Max payoff at or above $32 is about $2.50 of intrinsic value, so max profit ≈ $1.80.
Breakeven around $30.20, a bit over 2% above spot, which is inside the implied ±5.7% band.

This structure benefits if CPB delivers the expected 3–4% gap up, with limited downside (premium at risk) if the stock finishes at or below $29.50 after earnings.

5.2 Vol/Range: Short Vol With Guardrails via Iron Condor

Idea: Monetize an implied move that looks rich versus history, while capping tail risk on both sides.

Sell Dec 12 $27 put
Buy Dec 12 $25 put
Sell Dec 12 $32 call
Buy Dec 12 $34 call

Approximate mid prices from the chain:

$27 put ≈ $0.13, $25 put ≈ $0.03, $32 call ≈ $0.22, $34 call ≈ $0.20.
Net credit around $0.12 for a $2-wide put spread and $2-wide call spread.
Max loss per side ≈ $1.88 if CPB finishes at or below $25, or at or above $34, at expiry.

This structure essentially says: “CPB likely stays between $27 and $32 by Friday.” Our base case (3–4% up) lands the stock somewhere near $30–31, comfortably inside that range, while a realized move significantly larger than implied would be required to hit the wings.

Risk: a surprise guide cut or major negative shock that drives a >10% down move, or an unexpectedly euphoric reaction that catapults the stock into the mid-$30s, could push the condor toward its max loss.

5.3 Hedge / Contrarian: Downside Put Spread

For traders who own CPB stock into earnings or want a defined-risk hedge against our upside base case:

Buy Dec 12 $29.5 put
Sell Dec 12 $27 put

Approximate economics:

$29.5 put mid ≈ $0.80, $27 put mid ≈ $0.13 → net debit ≈ $0.67.
Spread width is $2.50, so max payoff is ≈ $1.83, achieved if CPB finishes at or below $27.
Breakeven around $28.80, roughly a 2.7% drop from spot.

This pays off in Scenarios 2–3 where guidance spooks the market and CPB trades back toward the mid-$20s, while still keeping capital at risk limited to the upfront debit.

Across all three examples, the key risks are:

Direction risk: earnings or guidance surprise to the downside (or upside) relative to our base case.
Magnitude risk: CPB moves less than expected (hurting directional spreads) or more than expected (hurting short-vol structures).
Volatility risk: in vol-selling trades, implied volatility does not compress as anticipated (for example, if guidance injects new uncertainty).

6. TL;DR

Campbell’s heads into its December 9 Q1 FY26 print with depressed shares, a cheap multiple, and a low bar on EPS and revenue, but a still-fragile narrative around tariffs and snacks. Our read of the options tape shows rich front-week implied volatility (~±5.7%) with defensive skew and heavy downside open interest, signaling a market more afraid of another guide cut than positioned for upside.

We expect a small EPS beat and “inline” guidance, with management reiterating the recent FY26 reset rather than cutting again. That should be enough for a modest relief gap higher of around 3–4%, shy of what the front-week straddle is pricing and likely accompanied by a meaningful post-earnings vol crush. Directionally we lean up with 0.58 confidence, while emphasizing that another guide reset by the new CFO remains the key downside tail risk.

Earnings Prediction