In premarket trade, Campbell Soup falls by almost three percent as the food company issues a lower outlook and fails sales projections with its latest quarterly financial report. The firm claims that, above and above the difficulties in matching the previous year’s comparison during the consumer stocking upstage of the pandemic, it experienced extra problems throughout the quarter. Inflation, supply chain expenses, and a series of executional constraints had a role in influencing our performance, and this occurred as we proceeded to implement our transformation strategy, especially in our Snack
Yesterday, while driving, I became fixated on a food company with an interesting name: Campbell Soup (CPB). It has a similar multi-faceted business model as another company I follow, Kellogg Company (K), except it has one major distinction: a remarkable performance during 2016 that has continued in 2017. In my view, CPB’s performance has kept pace with K, and given what I think are the company’s attractive fundamentals, I would be a buyer of CPB at its current levels in the mid $40 range.
A report by the Department of Labor shows that the U.S. unemployment rate remained steady in September. At 4.1% percent, the unemployment rate in September was down from 4.2% in August. The steady status of the labor market has kept the economy moving in a positive direction since the Great Recession ended. The S&P 500 dropped seven points in the trading session after the Labor Department release as major indexes also slipped lower in the global trade war picture. The Industrials and Consumer Discretionary sector fell the most in the session with almost one percent losses. Consumer Staples and Information Technology dropped by 0.3% and 0.1% respectively. Technology stocks were hit hard by worries of a drop in corporate profits. The sector was down by 0.
This news is troublesome to the investment community, and Campbell Soup could be downgraded to a “sell” according to the market sentiment by Morningstar. As a result of the poor performance, the selling pressure has increased and is seen at Campbell Soup. Even worse, the company expects sales and earnings from the consumer division to be worse than last year, and it announced the intention to sell the international operations. In addition, it will sell the Campbell Fresh business, which consists of Bolthouse Farms and Garden Fresh Gourmet, in a deal that will bring a total price of $2.9 billion. The company also announced a 4.3% dividend increase and a stock buyback program of $2 billion.
Now is the time to take advantage of the rise in debt to fund the acquisition. And then you can move on to the market share-grabbing developments that will affect the future of this stock and its peers. Since the first half of 2018, Campbell Soup has given back more than three-quarters of its value, putting it out of the running for consideration of a top investment. Of course, the company is attempting to refinance its debt to lower its interest rate and strengthen its balance sheet. In the third quarter, Campbell Soup raised $2.25 billion in cash through the sale of its Canadian business. In the process, it earned $43 million in net proceeds. That cash will help, but it won’t be enough. To boost sales, the company is eliminating 5 percent of its products and jettisoning 700 employees.
Campbell Soup is a reasonable value pick for those looking to take a position. At the moment, the company is trading with a P/E of about 9, but if Campbell Soup’s stock price maintains its current trend it should become fairly valued. In conclusion, Campbell Soup’s stock will likely be quiet for the next few weeks and the company will be in the spotlight only once again.