CLSA is dialing back near-term expectations for Campbell Soup Company CPB 0.13% and believes the company’s fiscal 2017 year will likely be more about investment than about profits. According to analyst Michael Lavery, Campbell’s investment in innovation will not come cheap.

“Campbell’s FY16 EBIT margin expansion and EPS growth have been impressive, but sales growth remains difficult, and margin gains have likely peaked,” Laverly explains.

“The soup category (one third of sales) continues to face pressures, and we expect higher investments in innovation and marketing to weigh on margins.”

Laverly adds that additional cost-cutting will be difficult, as the company has already significantly trimmed employee headcount and consolidated its business.

A recall of Bolthouse Protein Plus and issues within the carrot business resulted in a 12 percent decline in organic sales in fiscal Q4. In addition, Laverly believes the new procedures implemented in response to these issues will likely negatively impact sales in the coming year.

In light of these pressures, CLSA has lowered…

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