When it comes to canned soup, hands and memories alike tend to reach for Campbell's Soup (NYSE:CPB). The company that also handles V8 juice and Pepperidge Farm cookies has a pretty solid lock on the comfort foods market, and its latest earnings reports suggested that the company took full advantage of both winter and COVID-19 restrictions to come out ahead.
Earnings Put the Pot on to Boil
The earnings report wasn't a massive win, but a win nonetheless. The Zacks estimate called for the company to pull in earnings of $0.83 per share in the latest quarter, but Campbell's pulled a winner out of the quarter and brought in $0.84. Even better, it also pulled out a win against the same time the previous year; back then, earnings per share figures came in at $0.72 per share. This isn't anything new for Campbell's, though; reports note that the company has beaten earnings expectations every quarter for the last four quarters.
Full-year estimates, meanwhile, look solid as well. The consensus calls for Campbell's to pull in $3.05 per share for full-year adjusted earnings. Campbell's asserts this will likely happen, as its own range calls for between $3.03 and $3.11 per share, leaving only two conditions in which the $3.05 target is not actually achieved. The good news may only be temporary, however, as reports suggest Campbell's is looking for revenue to drop between 2.5% and 3.5% going forward. Organic sales are also expected to drop between 0.5% and 1.5%.
Hold Your Soup, Say Analysts
Analyst appraisals of Campbell's, meanwhile, have been about as stable as the company's place in memories and pantries all over the United States. That's what our latest research notes, anyway, as the company has held a very close “hold” rating for the last six months.
Six months ago, the company's “hold” consensus was comprised of four “sell” ratings, seven “hold”, and three “buy.” Three months ago, that shifted to four “sell”, nine “hold”, and three “buy.” That's the rating that the company had a month ago, and it's also the rating the company holds today. The consensus has not moved at any point in the last three months.
What's more, the price target has been slowly slipping like a cooling bowl of chicken noodle soup. Six months ago, the price target stood at $52.15. That dropped to $51.67 three months ago, and then a month ago it slipped once more to $51.13. Today, it stands at $50.93, and though the pattern is a clear decline, the amounts are always measurable in sub-whole-dollar figures.
Just Not the Demand for Soup and Comfort Foods
On a certain level, a loss in demand for most of Campbell's foods should be expected, especially at this time of year. As the weather outside warms up and we start considering getting outside more often, a big hot bowl of soup just doesn't seem as appetizing as it once did. It likely won't start seeming appetizing again until the leaves start turning colors again sometime around October 2021 or so. That's a point that Campbell's itself has already noted; while demand for V8 juice, and even Pepperidge Farms cookies to a certain extent, likely won't be as hard-hit, soup is a cold-weather food, and in North America, we're about to run out of cold weather in short order.
However, there's another point that's blitzing Campbell's short-term futures: COVID-19. As vaccine take-up rates increase and therapeutics start making a greater presence, the call to engage in what some have termed “deep pantrying” is falling by the wayside as well. The need to stock up a pantry at home against potential food shortages, or the possibility of being forced to remain at home for long periods of time, is starting to fade for most people. With it, Campbell's soup sales are also starting to decline.
This double-sided punch to Campbell's likely sales going forward won't help it in the short term. However, these are both factors that were likely to show up sooner rather than later anyway; weather always warms up the closer we get to July, and that puts a drag on soup sales every year. The wild card that was the coronavirus shook up sales this year, and the companies that benefited from coronavirus gains last year will now have to work without such gains this year.
It's time to put away the soup for now, but the astute buyer may want to keep an eye on the soup company's stock. After all, October isn't so far away, and a new bout of soup-buying is likely to show up before too much longer. The company may have a further leg down to go in the near term, but when the cold comes back—and you know it will—the end result should be good for Campbell's.
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