Campbell's Stock Tumbles 20% in 3 Months: What's Next for Investors?

Core Viewpoint - Campbell's Company (CPB) is facing significant challenges, with a 19.7% decline in share price over the past three months, underperforming both the industry and broader market indices [1][4][14] Stock Performance - Campbell's stock closed at $38.81, just above its 52-week low of $37.61, and is trading below its 50 and 200-day moving averages, indicating potential weakness [3][14] Sales and Market Dynamics - The company experienced a 1% decline in organic net sales in the first quarter of fiscal 2025, primarily due to shifting consumer dynamics and cautious spending habits [5][14] - The Snacks division saw a 2% drop in organic net sales, impacted by lower partner brand sales and increased price sensitivity among consumers [6][14] Cost Pressures - Campbell's has been dealing with cost inflation, with a 70 basis point decline in adjusted gross profit margin in the first quarter, largely due to the integration of Sovos Brands [7][14] - The base business experienced a 10-basis point reduction in gross margin, as productivity improvements only partially offset inflation and supply-chain cost pressures [8][14] Earnings Estimates - The Zacks Consensus Estimate for Campbell's earnings per share has been revised downward over the past 60 days, indicating a bearish outlook among analysts [9][14] - Current estimates for the upcoming quarters show a decline from previous projections, reflecting potential challenges in meeting profitability goals [10][14] Growth Opportunities - The Meals & Beverages division reported a 2% pro forma net sales growth in the first quarter, driven by strong performance in the soup portfolio [11][14] - Recent acquisitions, such as Sovos Brands, and strategic divestitures, like the noosa yogurt business, demonstrate Campbell's proactive approach to enhancing market position [12][14] Strategic Focus - The company aims to prioritize execution, innovation, and collaboration with retail partners to improve its market relevance and growth potential [13][14] - Management anticipates sequential improvement in the second quarter, driven by holiday demand and contributions from Sovos Brands starting March 2025 [13][14]