Why Campbell Stock Is Down ~15% since Its Fiscal Q3 2018 Results



Plenty of problems

As of June 4, the Campbell Soup Company (CPB) stock has fallen ~15% since the company reported sluggish fiscal third-quarter results on May 18. Consumers’ shift toward healthy foods from packaged foods is said to be the reason.

However, the steep decline in the stock’s price is not just the result of a shift in consumers’ eating habits. Campbell Soup’s problems are numerous, and this has left investors worried.

Campbell Soup’s strategies and portfolio are under scrutiny as the company’s soups and beverages business continues to underperform and the much-touted Fresh segment has failed to do any good. Higher trade spending to drive volumes, along with inflation in input and logistics costs, is also eating into its profitability. Furthermore, CEO Denise Morrison’s sudden exit and the company’s soft business outlook have raised concerns.

Persisting sales challenges and margin headwinds are likely to hurt the company’s financials. In addition, higher interest expenses and a tough retail environment pose even further challenges. Overall, Campbell Soup’s problems seem to be here to stay, at least in the near term, and they’re expected to hurt its stock performance.

However, the company’s efforts to shift its portfolio toward fast-growing categories via its acquisitions of Snyder’s-Lance and Pacific Foods are expected to drive its net sales in the coming quarters. Meanwhile, the lower effective tax rate is likely to cushion its earnings.

Stock disappoints

Campbell Soup stock fell more than 20% in 2017, and so far this year, it’s fallen ~31%, eroding a significant portion of investors’ wealth. Given the persisting challenges the company faces, it’s unlikely that the stock will see recovery in the near term.

The stocks of other major food manufacturers are also trading in the red as disruptions in demand, margin headwinds, and a tough retail environment take their toll. Shares of General Mills (GIS), the Kraft Heinz Company (KHC), the Hershey Company (HSY) and the J.M. Smucker Company (SJM) have marked double-digit falls so far this year.

Meanwhile, the Kellogg Company (K) and Conagra Brands (CAG) are showing signs of improvement, although their stocks are down in the low- to mid-single-digit ranges on a year-to-date basis.

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