What happened

Shares of Campbell Soup (NYSE:CPB) were sliding today after a strong third-quarter earnings report wasn't enough to overcome a wider sentiment about the economic recovery. Investors seem to believe that companies like Campbell that have thrived during the pandemic will pull back as life returns to normal.

As of 2:53 p.m. EDT on Wednesday, the stock was down 4.3%.

A collection of Campbell Soup brands

Image source: Campbell Soup.

So what

Campbell, which owns brands like Pepperidge Farm, Swanson, Prego, and Snyder's, said overall sales rose 15% to $2.24 billion on 17% growth in organic sales, which excludes the impact of acquisitions, divestitures, and currency exchange. That result beat expectations at $2.22 billion.

Gross margin increased from 33.5% to 34.5% and the company gained operating leverage from the increase in sales as overhead costs only grew modestly. That led to a surge in adjusted earnings per share, which were up 57% to $0.83, topping estimates at $0.75. 

CEO Mark Clouse said, "In the quarter, we experienced unprecedented broad-based demand across our brands as consumers sought food that delivered comfort, quality, and value." He also noted that millions of new households purchased Campbell products with household penetration rising more than 6 percentage points from the quarter a year ago. 

Despite the strong results, the stock pulled back as investors had largely expected a big quarter, and as the market now seems to be anticipating a quick economic recovery, which would mean packaged-food companies like Campbell would likely return to their normal slow growth rate.

Now what

Campbell also lifted its guidance for the quarter. The company is now calling for a full-year revenue increase of 5.5% to 6.5%, up from a prior range of a 1% decline to a 1% increase, and it expects adjusted EPS to be up 25% to 27% at $2.87 to $2.92, compared with a prior growth forecast of 11% to 13%. 

The company did not give specific guidance for the current quarter, but there should be some tailwinds from the lockdowns at least for the month of May as Americans are still spending more time at home than normal. Still, the stock's pullback shows that investors expect the economy to normalize. If that isn't true and pandemic-related changes remain, the stock could see more gains later in the year.