Soft SalesTrend Hurt Campbell Stock, More Downside Ahead?

Troubles don’t seem to be end for Campbell Soup Company (NYSE:CPB) which has been reeling under soft top-line trends. Well, this premium food products company hasn’t witnessed a single quarter of year-over-year top-line growth for a while now, and has also lagged the Zacks Consensus Estimate for three consecutive quarters. As Campbell is known for its canned foods, much of its sales debacle could be attributable to consumers’ evolving preferences for healthy, fresh and organic food products.

Battered by these industry challenges, this Zacks Rank #4 (Sell) stock has tumbled 25.4% year to date, faring worse than the industry’s 11.1% decline. So, let’s take a look at what’s hurting Campbell’s top-line performance, and if there’s any scope for revival in the near term.



Industry Challenges Take a Toll

While food and beverage is one of the most attractive and profitable markets, it remains vulnerable to alterations in consumers’ tastes and preferences; worldwide demographic changes and adverse effects of technological advancements. Of late, the food space has been grappling with problems related to intense competition and promotional activities stemming from consumers’ evolving preferences.

In this regard, competition from e-commerce trends mainly owing to Amazon.com Inc.’s (NASDAQ:AMZN) growing dominance is a major retail hurdle that is also expected to linger and pressurize grocery and mass networks.Unfortunately, Campbell has been bearing the brunt of these headwinds, as evident from its past performance. Evidently, net sales at Campbell Soup dipped by 1% in each of the last three quarters of fiscal 2017. While sales remained flat year over year in the first quarter of fiscal 2017, it witnessed declines for seven successive quarters prior to that.

Q4 Bears the Brunt as Well, Outlook Remains Bleak

Campbell Soup posted lower-than-expected results for the fourthquarter of fiscal 2017, as both earnings and sales came below the Zacks Consensus Estimate. Management blamed the murky quarter on a difficult scenario in the packaged food industry, where sales remained soft due to consumers changing food preferences, evolving shopping trends and a tough retail environment. Also, the company’s Campbell Fresh (C-Fresh) division just saw slight recovery in the quarter, before which it was marred by lingering constraints from the Bolthouse Farms Protein PLUS drinks recall made in June 2016.

Incidentally, the company expects the operating environment to remain difficult in fiscal 2018, wherein it also expects to witness cost inflation. Considering these obstacles, management expects sales growth for fiscal 2018 to range from negative 2% to flat. Adjusted EBIT growth is envisioned in a range of negative 1% to 1% increase. Well, management stated that it anticipates the first half results to remain significantly soft, which clearly remains a concern for the near term.

Estimates Trend Downward, Where’s Campbell Headed?

Owing to the dismal trends and murky outlook, the Zacks Consensus Estimate for the first quarter and fiscal 2018 have moved from $1.05 to 97 cents and from $3.22 to $3.08, respectively in the past 30 days.While Campbell Soup remains on track with its solid cost-savings plan and four key strategic imperatives, the aforementioned barriers keep us on the sidelines, at least for the near term.

Not Happy With Campbell? Check These Trending Picks from its Space

Ingredion Incorporated (NYSE:INGR) , with a long-term earnings per share growth rate of 11%, carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Chef’s Warehouse Inc. (NASDAQ:CHEF) , with a Zacks Rank #2, possesses a long-term earnings per share growth rate of 19%.

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