Is Campbell’s (CPB) the Cheapest Comfort Food on the Shelf?
By IPO Edge Editorial Staff
Comfort food is having a moment. Campbell’s (CPB) stock isn’t.
Americans keep cooking at home, a habit that should favor the soup and sauce aisle. Yet shares sit near the bottom of the packaged food group.
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This morning’s third-quarter report gave the bears plenty to work with. Organic sales fell 4%, adjusted EBIT dropped 24%, and adjusted EPS hit $0.50, down 32% from a year ago.
That put Campbell’s at #5 in our packaged foods searches, behind Archer-Daniels-Midland (ADM), General Mills (GIS), Kraft Heinz (KHC), and ConAgra (CAG), per our TrackStar data.
Here’s the twist. Campbell’s is the only name on this list still growing. The question is whether the market is right to look away.
Campbell’s Business
The Campbell’s Company traces its roots to 1869 and the condensed soup can that became an American pantry staple. It sells far more than soup now, with premium names driving the growth.
It reaches grocery, mass, club, and e-commerce retailers across North America, with brands that include Campbell’s, Swanson, Pacific, Rao’s, Prego, Goldfish, and Pepperidge Farm.
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Campbell’s segments its business into the following areas:
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Meals & Beverages (62% of total revenues) – Soups, broths, sauces, and beverages led by Campbell’s, Swanson, Pacific, Prego, and Rao’s
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Snacks (38% of total revenues) – Cookies, crackers, and salty snacks led by Goldfish, Pepperidge Farm, Snyder’s, and Lance
The quarter stayed soft. Soup consumption slipped 4.4% against a strong year-ago period, and salty snack sales fell 6.2%.
Management is leaning into at-home cooking with more brand support and a summer launch of Campbell’s Condensed Sauces.
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New Snacks leadership is cutting complexity and refocusing Goldfish on families with kids, where consumption has held flat for two quarters.
Cost cuts are the other lever, with roughly $200 million booked against a $375 million multi-year savings target, plus another $100 million in overhead reductions.
Financials
Source: Stock Analysis
Revenue tells the cleanest story. Trailing twelve-month sales of $9.9 billion top the $8.1 billion of fiscal 2019, even with sales off 2.9% on the year.
Margins are the soft spot. The 28.9% gross margin has slipped from above 30%, and that pressure flows straight down to a 6.1% net margin.
Cash generation still works.
