Is Campbell Soup Stock A Buy?

Campbell Soup Company (NYSE:CPB) is an iconic food and snack brand. In fact, its portfolio encompasses a lot of the most famous foods and snacks you see on grocery store shelves.

In spite of solid sales, it was a turbulent year for Campbell Soup investors. Its share prices bounced within a $15 trading range throughout 2020. Product demand didn’t translate to investor interest as tech stocks provided unprecedented returns. So, is Campbell Soup stock a Buy?

Pandemic panic shopping may be just a memory, but people are still choosing to cook and eat at home instead of going to restaurants. It’s a top money-saving tip in nearly every personal finance blog. That puts Campbell Soup in a great position for investors seeking a value.

Does Campbell Soup have the ingredients for success or will it leave investors with a sour taste in their mouths?

Campbell Soup Has A Vast Array Of Brands

Campbell Soup is a multi-national food company founded and based in Camden, New Jersey. Its classic red-and-white can design became an American icon, especially after pop artist Andy Warhol created a multi-colored masterpiece from it.

The company was started by a fruit merchant, Joseph Campbell, and grew over the course of 150 years to acquire a vast portfolio of products. Besides its namesake brand, the company owns Kelsen Group, Pepperidge Farms, Pace Foods, Swanson, Snyder’s-Lance, and Prego.

As consumer tastes change, Campbell pivots into brands recognized by younger audiences with more money to spend. It has a solid supply chain that includes dozens of food processing plants around the country.

Many of its brands are comfort foods for people staying at home for work and school. And as winter months make the days colder, soup du jour is a staple meal. Even its Goldfish and other snack products saw an increase through the year that forced the company to ramp up production.

Its products are a buy, but is Campbell Soup stock worth it?

Is Campbell Soup Stock A Buy?

Campbell Soup Company has a market capitalization near $15 billion with a P/E ratio under 10x. Share prices crashed to a 52-week low of $40.70 during Q1 2020. But prices then rebounded to $55.00, and  continued to hover around $50 throughout the year.

The company reported $8.85 billion in revenue for the 2020 fiscal year. This beat analyst expectations for every quarter and continued increasing sales through to the first quarter of its 2021 fiscal year.

Net sales increased 7 percent to provide $461 million in earnings for Q1 FY2021. This provided $1.02 earnings per share (EPS) while the company increased its quarterly dividend payment to $0.37 per share.

That brought its annual dividend to $1.48 or a 2.89 percent annual yield.

The company shored up its liquidity in 2020 to end the fiscal year with $1.24 billion cash and cash equivalents on hand. It expects consumer trends to remain relatively stable.

Its P/E ratio is much lower than the general S&P 500’s average of 26x. This means it could be a value buy for investors, especially among those who love stable dividend payments.

Will Campbell Soup Sales Remain Elevated?

The biggest risk to Campbell Soup investors is that once the economy reopens, people go out to eat at restaurants more and stop stocking up on comfort foods. CEO Mark Clouse believes it can sustain its sales beyond the pandemic, but that’s not guaranteed.

And we don’t know how long the pandemic will stretch out. Many estimates assume it could be well into 2025 before we see the full scale of damage done to the economy by the coronavirus.

People could tighten purse strings further as unemployment remains at record levels and government stimulus funds run dry. The 2020s are shaping up to be a decade unlike anything most of us experienced in our lifetimes.

It had over $6 billion in debt starting 2020 And the company has $921 million in debt maturing in the first half of 2021. Until it reduces the financial burden, investors could be lukewarm on the investment.

Campbell has deep pockets, but it still has over $5 billion in net debt. The company built itself back up from a rough year heading into the pandemic, and it may have been saved by mass panic shopping. That doesn’t mean it won’t have to fight to keep its space on grocery shelves.

And the company’s competitors are hungry for its market share.

Can Campbell Soup Competitors Win?

Campbell Soup Company is one of the largest and oldest food companies in the United States. It has plenty of competition though.

Companies like Mondelez International (MDLZ), Kellogg (K), General Mills (GIS), Coca-Cola (KO), and Nestle are chomping at its heels.

And food and meal delivery services like DoorDash and Blue Apron are trying to change the way we eat. This competition could eat away at the company’s profits.

Grocers and c-stores also love pushing their own brands. While it may just be white label Campbells, it changes the profit margins when the company sells through store brands and private labels.

Is Campbell Soup Stock A Buy? The Bottom Line

Campbell Soup is an iconic American food company that succeeded in business for over a century and a half. It divested assets and readjusted in the 2010s to changing consumer dietary and nutritional habits. This cost it money, but also positioned it well for the panic shopping spree of March 2020.

With revenues still elevated, Campbell needs to pay down and restructure its debt to get the best possible interest rates. Once its books are cleaned up, it has a green light to continue expanding its revenue streams through comfort foods and drinks.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.