The underwhelming Q3 print out of Campbell Soup (CPB 55.60, -1.34 -2.4%) this morning, on top of the in-line full year guidance, takes the stock to six-month lows as investors clearly got a bad taste in their mouths.
Specifically, for Q3 CPB reported worse than expected earnings per share (EPS) and revenues of $0.59 and $1.85 billion, respectively. Gross margin increased from 35.3% to 36.6%. Organic sales were down about 1%, ting higher promotional spending, while volumes were comparable to the prior year. Organic sales declines in Americas Simple Meals and Beverages and Campbell Fresh were partly offset by gains in Global Biscuits and Snacks.
By segment, sales in Americas Simple Meals and Beverages declined about 2% to $982 million driven by declines in soup and V8 beverages, but partly offset by gains in Prego pasta sauces. Sales of U.S. soup decreased 4% driven by declines in condensed soups and broth, partly offset by gains in ready-to-serve soups. In Global Biscuits and Snacks, sales in the quarter increased 2% to $623 million driven by gains in Pepperidge Farm, as well as gains in Arnott’s biscuits in both Australia and Indonesia. Lastly, at Campbell Fresh, sales in the quarter were down 6% to $248 million driven by lower sales of Bolthouse Farms refrigerated beverages.
In general, CPB attributed much of the performance in the quarter to the weak industry stating the industry as a whole, including Campbell, experienced significant consumption declines early in the calendar year. These industry trends coincided with weak consumer spending, which was at its lowest growth rate since 2009. While the company’s March and April sales growth rebounded, they were unable to offset the earlier declines.
Looking ahead then, CPB now expects sales to change by flat to down 1% (from flat to up 1%) which equates to about $7.88-7.96 billion. Further, the company sees EPS in the range of $3.04-3.09 (from $3.00-3.09).
In all, missing sales and earnings forecasts is one thing but CPB’s lowered full year guidance seems to be propelling the stock to six-month lows. Into the report, CPB stock had been floating around the -5% YTD level, but today scoots to YTD lows following the report.