The Campbell's Company CPB appears to be in a difficult spot. Over the past three months, the company has seen its shares tumble 19.7%, underperforming the industry’s decline of 13.8%. The food and beverage giant has also lagged the broader Zacks Consumer Staples sector’s drop of 11% and the S&P 500’s growth of 0.8% in the same time frame.
CPB Price Performance vs. Industry, S&P 500 & Sector
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Closing the trading session at $38.81 yesterday, Campbell stock stands just about a tad above its 52-week low of $37.61 reached this Monday. CPB is also trading below its 50 and 200-day moving averages, indicating potential weakness in the stock's momentum.
This significant decline raises a crucial question for investors: Is this a temporary setback for Campbell's, or does it signal deeper concerns? As the company works to navigate these headwinds, understanding its course and strategic priorities becomes important for those considering its long-term investment potential.
What’s Not Working for CPB Stock?
Campbell’s continued to face challenges from shifting consumer dynamics in the first quarter of fiscal 2025, which adversely impacted its performance. A continued dynamic consumer environment, characterized by cautious spending habits and evolving preferences, resulted in a 1% decline in organic net sales. The Snacks division, in particular, bore the brunt of these shifts. These adverse trends not only affected volume and mix but also placed pressure on margins as the company navigated rising supply-chain costs and the need for promotional investments to remain competitive. As Campbell’s looks to address these headwinds, its performance underscores the broader uncertainties in the macroeconomic landscape and the evolving consumer behavior impacting the food industry.
Within the Snacks unit, organic net sales dipped 2% in the first quarter, driven by lower partner brand sales, volume and mix declines, and reduced net price realization. The segment was affected by consumers demonstrating increased price sensitivity and gravitating toward private-label options in categories like cookies and pretzels. The salty snacks category also faced heightened competition from new entrants and intensified promotional activity. Operating earnings for the Snacks division declined 12%, resulting in a 120-basis point drop in the operating margin to 13.3%.
Apart from this, Campbell’s has been witnessing cost inflation for a while. In the first quarter, the adjusted gross profit margin declined 70 basis points, driven primarily by the integration of Sovos Brands, which accounted for 60 basis points of the decline. Excluding Sovos, the base business experienced a 10-basis point reduction in the gross margin as productivity improvements and cost-saving initiatives only partially offset core inflation and ongoing supply-chain cost pressures. The company’s ability to balance inflationary pressures with its strategic goals will be critical in maintaining its trajectory toward growth.
CPB Estimates: Is More Trouble on the Horizon?
The Zacks Consensus Estimate for Campbell’s earnings per share for the current and upcoming fiscal years has been revised downward over the past 60 days. This shift indicates a growing bearish outlook among analysts and highlights potential obstacles the company may face in meeting its profitability goals.
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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Can Campbell’s Growth Efforts Ignite a Recovery?
The Meals & Beverages division continues to be a bright spot for Campbell’s. The segment saw 2% pro forma net sales growth in the first quarter of fiscal 2025, with 3% growth in volume and mix. The soup portfolio performed well, achieving 1% growth in dollar consumption, driven by ready-to-serve soups like Chunky and Rao’s, as well as Swanson broth, which benefited from increased category usage. Continued at-home cooking trends and brand trust provide tailwinds for sustained growth in this segment.
Campbell’s recent acquisitions and divestitures demonstrate a proactive approach to enhancing its market position and profitability. The company acquired Sovos Brands in March 2024 and is reaping impressive gains from its addition, as witnessed by the first-quarter fiscal 2025 sales. On the flip side, CPB recently announced a deal to divest the noosa yogurt business to Lakeview Farms, as the yogurt category is not part of the company's core strategy. The company also concluded the divestiture of its Pop Secret popcorn business in August 2024, which reflects its strategic focus on refining its Snacks portfolio to enhance growth potential and profitability.
Campbell’s is focused on prioritizing execution, innovation and strong collaboration with retail partners to stay relevant and succeed by delivering both quality and value. On its first-quarter fiscal 2025 earnings call, management stated that it expects to witness a sequential improvement in the second quarter, driven by robust holiday demand and further momentum in the second half. Key drivers are likely to include enhanced consumer confidence, normalized pricing and contribution from Sovos Brands to organic growth, starting March 2025.
CPB Stock: Navigating the Road Ahead
Campbell's recent stock decline, underperforming peers and broader indices signal significant challenges. Weakness in the Snacks division, persistent cost inflation and declining earnings estimates dampen investor confidence. While the Meals & Beverages segment shows promise, it may not offset broader struggles. Until Campbell’s demonstrates clear progress in stabilizing margins and driving sustainable growth, its path ahead looks uncertain, leaving a cautious outlook for investors. The company currently carries a Zacks Rank #4 (Sell).
Some Solid Staple Bets
We have highlighted three better-ranked stocks from the Consumer Staples sector, namely United Natural Foods, Inc. UNFI, Freshpet FRPT and Tyson Foods, Inc. TSN.
United Natural currently sports a Zacks Rank of 1 (Strong Buy). UNFI delivered a trailing four-quarter earnings surprise of 553.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for United Natural’s current financial-year sales and earnings suggests growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.
Freshpet, a pet food company, presently sports a Zacks Rank #1. FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 27.2% and 228.6%, respectively, from the year-ago period’s reported figure.
Tyson Foods is a food company worldwide. It operates through four segments: Beef, Pork, Chicken and Prepared Foods. It currently carries a Zacks Rank #2 (Buy). TSN delivered a trailing four-quarter average earnings surprise of 57%.
The consensus estimate for Tyson Foods’ current fiscal-year sales and earnings indicates growth of 2% and 13.6%, respectively, from the prior-year reported levels.
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