Forget Campbell Soup, Buy These Food Stocks Instead

Camden, NJ-based Campbell Soup Company (NYSE:CPB) ended fiscal 2017 on a dismal note with the company missing on earnings as well as sales as a tough operating environment continues to prevail across the food industry.

Although macro-economic conditions continue to improve in the United States, shifting demographics, changing consumer preference and technology advancements continue to change the consumer food and retail landscapes. Increasing competition, new store formats and evolving business models including the growth of store brands and the influx of e-commerce and meal delivery services represent major challenges.

Campbell Soup also provided a disappointing outlook for fiscal 2018. Revenues will remain under pressure with sales in Americas Simple Meals and Beverages expected to decline while the V8 Beverage business will remain flat. The Global Biscuits and Snacks and Campbell Fresh segments are expected to record sales growth. Meanwhile, U.S. soup sales will be impacted, especially in the first half of fiscal 2018, due to the inability to reach an agreement with a large customer on a promotional program (Read more: Campbell Misses on Q4 Earnings & Sales, Stock Loses 5%).

The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 3.7% downward over the last 30 days and has lost 21% of its value year to date versus the 7.7% decline of its industry.

With Campbell Soup being a Zacks Rank #4 (Sell) stock, we advise investors to avoid the stock and focus on other names in the sector. Although the industry remains under pressure and has lagged the broader market, cost savings, margin improvement and consolidation are some of the factors that could help support the sector.

While it may seem like a daunting task to select winning stocks in this sector, we have zeroed in on three companies that sport a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nomad Foods (NYSE:NOMD) : UK-based Nomad Foods holds a key position in the frozen foods market. The company’s products have a presence in 17 countries with leading market share in Western Europe. Iconic frozen food brands include Birds Eye, Iglo, and Findus. Revenues continue to be driven by market share gains and a growing category footprint. Continued momentum within the core portfolio is being supported by upgraded products and packaging, distribution gains, and improved promotional effectiveness. Gross margins should continue expanding over the remainder of the year. Another key catalyst for the company would be an accretive merger and acquisition (M&A) deal, which remains a key strategic priority for management.

Nomad Foods, a Zacks Rank #1 stock, has gained 60.5% year to date, compared to the 7.7% decline of the industry it belongs to. Nomad Foods has a VGM Score of B - our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or #2 offer the best upside potential.

The Chefs' Warehouse, Inc. (NASDAQ:CHEF) : Ridgefield, CT-based The Chefs' Warehouse is a premier distributor of specialty food products in the United States and Canada. The company is focused on serving the specific needs of chefs who own and/or operate some of the nation's leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos and specialty food stores.

The Chef’s Warehouse, a Zacks Rank #2 stock, has gained 6% year to date, compared to the 7.7% decline of the industry it belongs to.

The company also has a VGM Score of B.

Kerry Group, plc (OTC:KRYAY) : Ireland-based Kerry is a global taste & nutrition and consumer foods group that provides a vast portfolio of innovative Taste & Nutrition technologies and systems and Functional Ingredients & Actives for the global food, beverage and pharmaceutical industries. Kerry Foods, the company’s consumer foods division, processes and supplies consumer foods in select EU markets. The company continues to witness volume growth across the global marketplace while underlying margin growth is being driven by an enhanced product mix. Kerry Foods remains well-positioned in the growing dairy and meat snacking segments as well as meal solutions categories.

Kerry Group is also a Zacks Rank #2 stock with a VGM Score of B. The stock has gained 37.6% year to date, compared to the 7.7% decline of the industry it belongs to.

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