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Bear of the Day: Campbell Soup Company (CPB)

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Campbell Soup Company (CPB - Free Report) shares have plummeted roughly 21% over the last three years as the packaged food firm tries to navigate shifting consumer habits and the proliferation of healthier upstart options. 

Overview

Campbell reported its Q4 and full-year financial results at the end of August and it wasn’t pretty. The firm’s fourth-quarter sales dipped 3% from the year-ago period, excluding a 36-point benefit from its recent acquisitions of Snyder’s-Lance and Pacific Foods. Campbell’s organic full-year revenues slipped 2%.

These recent acquisitions were made to help the company try to compete in a more diverse market, geared toward fresh and healthy options. Meanwhile, Campbell’s Q4 marketing and selling expenses soared 29% as it tried to incorporate its new brands. Now, Campbell hopes to sell its international and refrigerated-foods businesses, which include Bolthouse Farms, Garden Fresh, and Kelsen brands, among others.

Campbell’s is not alone, Coca-Cola (KO - Free Report) is set to purchase UK coffee giant Costa for $5.1 billion as it tries to expand its portfolio beyond sugary drinks. However, Campbell’s latest effort, as first reported by The Wall Street Journal and later confirmed by the company, will see it somewhat abandon its plans to offer healthier options. The company also reportedly remains open to an outright sale.

Price Movement

The last three years have not been kind to Campbell stock. Shares of CPB have fallen over 21% in the last 36 months, which looks even worse compared to the S&P 500’s nearly 50% jump. Campbell’s woes have continued despite a brief June jump. In fact, shares of CPB are down over 16% since the start of the year. But investors will notice that its industry hasn’t performed well either and is down over 7% during this same period.

 

 

Outlook & Earnings Revisions

Now that we have covered everything that has happened recently, let’s see what investors should expect going forward. Our current Zacks Consensus Estimate is calling for the company’s first-quarter revenues to jump by 24.44% to hit $ 2.69 billion. It is worth remembering that this figure includes the Pacific Foods and Snyder’s-Lance acquisitions, which were completed in December 2017 and March 2018, respectively.

The bottom end of the income statement is what looks bad for Campbell. The firm’s adjusted quarterly earnings are projected to sink by 18.5% to hit $0.75 per share. Meanwhile, Campbell’s fiscal year EPS figure is expected to fall by roughly 9.8%.

CPB has received four downward earnings estimate revisions for its upcoming two quarters over the last 60 days, against no upward changes. During this same time, Campbell has seen six full-year revisions, with 100% agreement to the downside.

Bottom Line

Campbell is currently a Zacks Rank #5 (Strong Sell) based on its negative earnings revision trend. This shows that some analysts are less positive about CPB’s future earnings outlook as the food power tries to chart a new course. 

Investors interested in the food industry might consider Conagra (CAG - Free Report) , Nestle SA (NSRGY - Free Report) , or Pinnacle Foods PF, which all currently sport a Zacks Rank #2 (Buy).

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