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We reiterate our Underperform stance on the high-quality foods and simple meals manufacturer, Campbell Soup Company (CPB - Analyst Report) as the company posted disappointing first-quarter fiscal 2014 results.

Why Reiterate?

Campbell’s first-quarter fiscal 2014 results suffered due to the late Thanksgiving holiday, weakness in core business categories, higher marketing expenses and recall of Plum Organics pouch products. The company’s bottom-line results declined 21% year over year to 66 cents per share, while it was much lower than the Zacks Consensus Estimate of 87 cents per share.

Net sales fell 2% to $2,165 million from the prior-year quarter and missed the Zacks Consensus Estimate of $2,307 million.

Further, the company’s future looks gloomy given its lowered sales and earnings growth guidance and lack of any catalyst. The company now expects sales to increase by 4%–5% versus 5%–6% forecasted earlier. Adjusted earnings growth guidance range was trimmed to 2%–4% from 3%–5% projected earlier. Fiscal 2014 earnings are expected to range between $2.53 and $2.58 per share.

The company’s lowered guidance hurt investor sentiments, triggering a downward movement in the Zacks Consensus Estimate for fiscal 2014 and 2015, which moved down 3.8% and 3.3%, respectively, in the last 60 days.

Moreover, Campbell continues to be affected by the sluggish growth and slowdown in consumption witnessed in the North American food industry over the last few quarters. The food industry is witnessing changes in consumer preferences (for example, toward health and wellness products) as well as spending shift toward economic products.

Further, rising commodity prices, intense competition and exposure to unfavorable foreign currency fluctuations may undermine the company's future performance.

Other Stocks to Consider

Currently, Campbell has a Zacks Rank #4 (Sell). Some better-ranked stocks in the food industry include ConAgra Foods Inc. (CAG - Analyst Report), The Hain Celestial Group Inc. (HAIN - Analyst Report) and Green Mountain Coffee Roasters Inc. (GMCR - Analyst Report). All these stocks carry a Zacks Rank #2 (Buy).

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