CPB – CDS 51bps, Base Case iCDS 190bps, Negative Case iCDS 342bps, 2025 3.950% Bond YTW of 3.100%, iYTW of 1.760%, Baa2 Rating from Moody’s, HY2 (equivalent to B2) Rating from Valens, Moderate Refinancing Need

January 21, 2022

  • Credit markets are understating credit risk, with a cash bond YTW of 1.760% and CDS of 51bps relative to an Intrinsic YTW of 3.100%, and an Intrinsic CDS of 190bps. Meanwhile, Moody’s is materially understating CPB’s fundamental credit risk with its Baa2 credit rating six notches higher than Valens’ HY2 (B2) credit rating.

  • Earnings Call Forensics™ analysis of the firm’s Q1 2022 earnings call highlights that management may lack confidence in their ability to sustain effective pricing execution, maintain consistent brand share gains and Prego market leadership, and improve operating income for Snacks. Management may also have concerns about the sustainability of end-market canned goods demand and the impact of competitive, inflationary, and labor pressures on their business. Moreover, they may lack confidence in their ability to drive margin improvements, limit advertising and consumer promotion expenses, and manage capex investments. Finally, they may have concerns about the continued lapping of retailer inventory replenishment, and they may lack confidence in their ability to build sufficient soup capacity.

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