The Campbell's Company (CPB Quick QuoteCPB - Free Report) has faced a turbulent few months, with its share price declining 16.8% over the past six months, significantly underperforming the industry’s 6.9% fall. This branded convenience food products company also lagged the broader Zacks Consumer Staples sector’s growth of 0.6% and the S&P 500’s decline of 1.8% in the same period.

CPB’s Price Performance vs. Industry, S&P 500 & Sector

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Closing the trading session at $39.39 yesterday, Campbell’s share price stands closer to its 52-week low of $36.92, reached on Feb. 10. It is also trading below its 200-day moving averages, indicating potential weakness in the stock's momentum.

These aspects raise a crucial question for investors: Is this a temporary setback for Campbell's, or does it indicate something more concerning?

CPB Trades Below 200-Day Moving Average

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What’s Dragging Down Campbell's Shares?

Campbell's has been facing ongoing cost inflation, which impacted its fiscal second-quarter performance. The company’s adjusted gross profit margin contracted 100 basis points (bps) to 30.4% due to cost inflation, supply-chain costs, unfavorable net price realization and the acquisition. Looking ahead, management expects inflation to remain in the low-single-digit range for fiscal 2025. To mitigate these challenges, CPB has implemented proactive cost-saving measures. However, its ability to effectively manage inflation while aligning with its strategic goals will be crucial for its growth.

Another major challenge for Campbell’s is the weaker-than-expected performance of its Snacks business, as shifting consumer trends and competitive market dynamics continue to pose hurdles. This trend persisted in the fiscal second quarter, with net sales in the division totaling $1,006 million, down 6% year over year. Organic sales in the segment declined 3%, caused by lower sales in third-party partner and contract brands, Goldfish crackers and Snyder’s of Hanover pretzels. The decline was attributed to a 2% drop in volume/mix and a 1% decrease in net price realization.

Total Snacks consumption for the company’s leadership brands declined by almost 1% in the fiscal second quarter. Operating earnings for the Snacks division fell 29%. In its last earnings call, management emphasized that while the company expects to make continued sequential progress on Snacks margins, it does not anticipate reaching the previously expected margin levels.

More Pain Ahead for Campbell's?

Following its underperformance so far in fiscal 2025 and a slower-than-anticipated recovery in key snacking categories, Campbell’s recently signaled a muted outlook for the second half of the year, along with an update to its fiscal 2025 guidance.

The company now forecasts fiscal 2025 net sales growth of 6-8%, down from its previous 9-11% estimation. Organic net sales are expected to range from a 2% decline to flat compared with the prior outlook of flat to 2% growth. The revised organic net sales outlook reflects a more subdued volume/mix contribution in the second half, following a weaker-than-expected recovery in snacking categories during the fiscal second quarter. Adjusted earnings per share (EPS) is now expected to decline 4% to 1%, ranging from $2.95 to $3.05, compared with the previous forecast of $3.12-$3.22 and the $3.08 reported in fiscal 2024.

CPB’s Estimates Suggest a Downtrend

The Zacks Consensus Estimate for Campbell's earnings per share for the current and upcoming fiscal year has been revised downward over the past 30 days. This shift indicates a growing bearish outlook among analysts and highlights potential obstacles that the company may face in meeting its profitability goals.

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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Investor Takeaway for CPB Stock

Given Campbell’s weak stock performance, declining earnings outlook and ongoing challenges in managing inflation and consumer demand, investors may want to exercise caution. With a Zacks Rank #5 (Strong Sell), CPB faces significant headwinds, including sluggish recovery in the Snacks division and a lower-than-expected fiscal 2025 forecast. Near-term risks suggest that waiting for signs of operational improvement or a better entry point may be a prudent strategy.

Some Solid Staple Bets

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The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial-year earnings indicates a decline of 2.6% from the prior-year reported level.

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The Zacks Consensus Estimate for Utz Brands’ current financial-year sales and earnings indicates growth of 1.2% and 10.4%, respectively, from the year-ago numbers.

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The consensus estimate for United Natural Foods’ current financial-year sales and earnings implies growth of 1.9% and 485.7%, respectively, from the year-ago figures.