Please ensure Javascript is enabled for purposes of website accessibility

Why Campbell Soup Company Stock Fell 12.4% Friday

By Daniel Sparks - May 18, 2018 at 12:04PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A challenging environment has Campbell management less optimistic about its fiscal year 2018 profitability. But can a new CEO and a renewed effort to turn things around help?

What happened

Shares of food and beverage company Campbell Soup (CPB 1.06%) fell as much as 12.4% on Friday, following the company's fiscal third-quarter results. At 11:29 a.m. EDT, shares are down about 11%.

Investors are likely bearish toward the stock on Friday primarily because of management's reduced outlook for full-year profitability and the announcement that Campbell Soup CEO Denise Morrison is stepping down. Morrison's decision to step down comes amid a challenging environment in which Campbell's annual sales have fallen for three fiscal years in a row.

A chalkboard sketch of a downward-trending chart.

Image source: Getty Images.

So what

For its fiscal third quarter, Campbell reported a 15% year-over-year increase in sales. But this double-digit increase includes sales from Campbell's recent acquisition of Snyder's-Lance. Organic sales were in line with sales in the year-ago period.

With a gross margin of 29.1%, down from 35.9% in the year-ago quarter, Campbell management said the key metric was below its expectations.

"Based on our third-quarter results and outlook for the balance of the year, we are lowering our fiscal 2018 earnings guidance," said Campbell CFO Anthony DiSilvestro.

Campbell's results were negatively impacted by "both execution-related and external challenges," DiSilvestro said.

Now what

For fiscal year 2018, management was previously forecasting adjusted full-year fiscal 2018 earnings per share to decline about 3%. Now management expects adjusted EPS to decline between 6% and 5%.

Aiming to reverse the downward trajectory of its business, DiSilvestro said the company is "addressing these challenges with renewed urgency."

DiSilvestro explained:

Looking ahead, we will be reviewing all aspects of our strategic plans and portfolio composition. We anticipate that our review, which will take several months to complete, will lead to changes designed to improve our operating performance and create long-term shareholder value. We plan to discuss the outcome of this review when we report fourth-quarter and full-year results in late August.

Effective immediately, Morrison has been replaced as CEO by board member Keith McLoughlin, who will serve as interim CEO as the company attempts to improve execution and return to growth.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Campbell Soup Company Stock Quote
Campbell Soup Company
$48.40 (1.06%) $0.51

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.