Executive Summary

Q2 FY25 results were mixed: Net Sales rose 9% to $2.69B driven by Sovos, but organic sales fell 2%; GAAP EPS was $0.58 and adjusted EPS declined 8% to $0.74, with higher interest expense offsetting modest adjusted EBIT growth .
Guidance was lowered: FY25 Net Sales growth cut to +6–8% (from +9–11%), Organic Net Sales to -2%–0% (from 0–2%), Adjusted EBIT to +3–5% (from +9–11%), and Adjusted EPS to $2.95–$3.05 (from $3.12–$3.22); cost savings target raised to $120M and net interest guided to $325–$330M .
Snacks underperformed (Net Sales -6%, operating earnings -29%) amid category softness, inflation and operational headwinds; management expects sequential Snacks margin improvement in 2H via reduced promo intensity, supply chain normalization, and mix actions .
Strategic actions: completed the sale of noosa (dilutive ~$0.01 to FY25 EPS), declared a $0.39 quarterly dividend, and reiterated Rao’s growth trajectory as slightly above 10% FY25 pro forma; Sovos was slightly accretive to Q2 adjusted EPS .
Stock reaction catalysts: guidance cut on muted Snacks recovery, tariff uncertainty on tinplate/canola, and management’s tone on Goldfish and margin rebuild; upside hinges on Rao’s momentum and execution of $120M savings program .

What Went Well and What Went Wrong

What Went Well

Meals & Beverages grew Net Sales 21% with operating earnings +18%, supported by Sovos; positive volume/mix (+1%) mitigated lower net price realization (-2%) and organic sales were down just 1% .
Rao’s momentum sustained: management reiterated FY25 pro forma growth slightly above 10% and sees the brand becoming the next $1B platform; Sovos was slightly accretive to adjusted EPS in Q2 .
Cost savings execution: delivered $65M YTD under the new $250M program; raised full-year savings goal to $120M, supporting margins despite low single-digit inflation .

Quote: “We remain confident in our ability to successfully navigate the current consumer landscape… We have a strong foundation to deliver long-term sustainable, profitable growth” — CEO Mick Beekhuizen .

What Went Wrong

Snacks weakened: Net Sales -6% and operating earnings -29% YoY due to cost inflation, supply chain headwinds in fresh bakery, unfavorable mix, and increased marketing; organic sales -3% with volume/mix -2% .
Gross margin pressure: reported GM fell 110 bps YoY to 30.5% (adjusted -100 bps to 30.4%) on cost inflation, other supply chain costs, unfavorable net price realization, and acquisition mix .
Interest expense surged to $80M (vs $46M) on higher debt, driving adjusted EPS down 8% YoY to $0.74 despite adjusted EBIT +2%; snacks category recovery slower than anticipated, prompting guidance cuts .

Financial Results

Consolidated Results vs Prior Year and Prior Quarter

Metric	Q4 FY24	Q1 FY25	Q2 FY25
Net Sales ($USD Millions)	$2,293	$2,772	$2,685
GAAP EPS ($)	$(0.01)	$0.72	$0.58
Adjusted EPS ($)	$0.63	$0.89	$0.74
EBIT ($USD Millions, GAAP)	$77	$367	$327
Adjusted EBIT ($USD Millions)	$329	$432	$372
Gross Profit Margin % (GAAP)	29.4%	31.3%	30.5%
Gross Profit Margin % (Adjusted)	31.4%	31.4%	30.4%
Net Interest Expense ($USD Millions)	$83	$83	$80
Effective Tax Rate (GAAP)	50.0%	23.2%	30.0%
Effective Tax Rate (Adjusted)	23.2%	23.5%	24.0%

Observations:

Sequentially, Net Sales fell from $2.77B (Q1) to $2.69B (Q2) on softer Snacks; adjusted EPS similarly declined from $0.89 to $0.74 .
YoY, adjusted EBIT rose modestly (+2%) to $372M, but adjusted EPS fell (-8%) on higher interest expense; GM mix impact from acquisition and inflation persisted .

Segment Breakdown (Q2 FY25 vs Q1 FY25)

Segment	Net Sales Q1 FY25 ($MM)	Net Sales Q2 FY25 ($MM)	YoY % Q2	Organic Net Sales Δ Q2	Operating Earnings Q1 ($MM)	Operating Earnings Q2 ($MM)	YoY % Q2
Meals & Beverages	$1,706	$1,679	+21%	-1% (vol/mix +1%, price -2%)	$337	$291	+18%
Snacks	$1,066	$1,006	-6%	-3% (vol/mix -2%, price -1%)	$142	$114	-29%
Total	$2,772	$2,685	+9%	-2%	—	—	—

Notes: Q2 Snacks declines driven by partner/contract brands, Goldfish, Snyder’s; Meals & Beverages declines in SpaghettiOs and U.S. soup offset by foodservice gains .

KPIs and Other Financial Data

KPI	Q4 FY24	Q1 FY25	Q2 FY25
Cash from Operations ($MM, YTD)	$1,185 FY total	$225 Q1	$737 6M YTD
Capital Expenditures ($MM, YTD)	$517 FY total	$110 Q1	$211 6M YTD
Cash & Cash Equivalents ($MM)	$108	$808	$829
Total Debt ($MM)	$7,184	$7,917	$7,675
Net Interest Expense ($MM)	$83	$83	$80
Marketing & Selling (% Net Sales)	~8%	~9%	~10%
Adjusted Effective Tax Rate (%)	23.2%	23.5%	24.0%
Net leverage (Net Debt/Adj. EBITDA)	—	3.7x (end Q1)	3.7x (end Q2)

Non-GAAP adjustments in Q2: cost savings/optimization ($25M EBIT impact), commodity MTM gains (-$14M to COGS), accelerated amortization ($7M), impairments ($26M), divestiture charges (deferred tax $15M) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales Growth	FY2025	+9% to +11%	+6% to +8%	Lowered
Organic Net Sales	FY2025	0% to +2%	-2% to 0%	Lowered
Adjusted EBIT Growth	FY2025	+9% to +11%	+3% to +5%	Lowered
Adjusted EPS ($)	FY2025	$3.12 to $3.22	$2.95 to $3.05	Lowered
Cost Savings ($MM)	FY2025	$90M (prior expectation)	$120M	Raised
Net Interest Expense ($MM)	FY2025	$340–$345M (Q1 update)	$325–$330M	Lowered
53rd Week Benefit	FY2025	~2 pts sales/EBIT, ~$0.07 EPS	~2 pts sales/EBIT, ~$0.07 EPS	Maintained
Divestiture Impact (noosa)	FY2025	Not included in prior	~-1 pt sales; ~$0.01 EPS dilution	Added

Additional assumptions: Sovos moves into organic mid-Q3; tariffs excluded from guidance due to uncertainty .

Earnings Call Themes & Trends

Topic	Q4 FY24 (prior)	Q1 FY25 (prior)	Q2 FY25 (current)	Trend
Snacks margins	Advancing margin journey; noted price/promo normalization	Snacks OM 13.3%, expecting 2H improvement	Q2 Snacks operating earnings -29%; management targets sequential margin recovery and ~13.5% FY OM	Near-term down; guided gradual rebuild
Rao’s growth	Transformative contribution; integration ahead of plan	Pro forma growth slightly above 10%; accretive in 2H	Reiterated >10% FY pro forma; expects long-term mid- to high-single-digit	Sustained strength
Broth/private label	Benefit from private label constraints	Private label recovery expected; slight 2H headwinds	Recovery slower than anticipated; headwind less than prior expectations	Headwind moderating
Promotions/pricing	Lapping high prior-year spend	Step-up in Q2; <100bps net price investment FY	Holiday promo weighed on margin; expect lower promo intensity in 2H	Normalizing in 2H
Supply chain	Competitive advantage; productivity improvements	Productivity offsets inflation; $250M savings program	Bakery operational headwinds Q2; improvements underway	Improving post-Q2
Tariffs/macro	Not highlighted	Not highlighted	Monitoring tinplate/canola tariffs; potential pricing actions if needed	New risk surfaced

Management Commentary

Strategic posture: “We are updating our full-year guidance... we remain confident... to deliver long-term sustainable, profitable growth and shareholder returns” — Mick Beekhuizen (CEO) .
Snacks margin actions: “We are proactively addressing Snacks margin and anticipate a recovery in Q3, with a gradual improvement throughout the second half” — Mick Beekhuizen .
Rao’s outlook: “We remain confident in Rao’s becoming our next $1 billion brand” — Mick Beekhuizen .
Savings cadence: “We are increasing our cost savings expectations for the full year from $90 million to $120 million” — Carrie Anderson (CFO) .
EPS phasing: “Second half organic net sales growth to sequentially improve from Q2, turning positive in the fourth quarter... second half adjusted EPS to be more equally distributed, excluding the 53rd week” — Carrie Anderson .

Q&A Highlights

Snacks outlook and EPS reduction: Management quantified ~$80M EBIT reduction at guidance midpoint, ~~$60M tied to Snacks top-line shortfall (~~$200M) and ~$20M net of lower margin and cost savings; FY Snacks margin now ~13.5% .
Goldfish strategy: Focus on support, innovation (LTOs), and price-pack architecture to restore growth amid heightened competitive promotions in crackers .
EPS cadence: Despite typical seasonality, management expects more even EPS split between Q3 and Q4 (ex-53rd week), aided by lapping higher promo and improved mix/support in Q4 .
Broth dynamics: Category stronger than expected; private label recovery slower, implying smaller headwinds than previously anticipated .
Tariff risk: Monitoring tinplate steel and canola oil imports from Canada; potential mitigation with suppliers and pricing actions if tariffs implemented .

Estimates Context

We attempted to retrieve S&P Global consensus estimates for Q2 FY25 EPS and Revenue, but the daily request limit was exceeded and data was unavailable at time of analysis. As a result, explicit beat/miss versus Wall Street consensus cannot be determined in this report [Values retrieved from S&P Global]*.

Key Takeaways for Investors

Guidance reset reflects slower Snacks recovery; near-term multiple risk if category softness persists, but FY25 earnings supported by raised $120M savings and lower interest expense guidance .
Rao’s remains a bright spot with >10% FY pro forma growth and accretive potential; continued brand building and innovation underpin medium-term growth optionality .
Meals & Beverages resilience (volume/mix positive, foodservice and condensed cooking/broth strength) provides ballast while Snacks mix and operations normalize .
Watch Q3 for margin inflection in Snacks and promo normalization; Q4 should benefit from lapping heavy promos and 53rd week (~$0.07 EPS) .
Tariff developments on tinplate/canola and retaliatory actions could affect costs and Canadian exports; management evaluating mitigations and potential pricing .
Dividend support ($0.39/qtr) and cash balance ($829M) provide capital allocation flexibility while deleveraging toward 3x by FY27 .
Tactical trade setup: sentiment likely hinges on evidence of Snacks stabilization (Goldfish, cookies/pretzels) and delivery against savings/margin plans; upside lever remains sustained Rao’s outperformance .

Additional relevant Q2 press releases:

Declared quarterly dividend of $0.39 (payable Apr 28, 2025) .
Completed sale of noosa (dilutive ~$0.01 to FY25 EPS) .
Announced Q2 FY25 results reporting date and call details .

Footnote: *We attempted to fetch S&P Global consensus estimates via GetEstimates, but the Daily Request Limit was exceeded at the time of access; therefore, estimates are unavailable for comparison in this report.

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