After riding high for some time last year as people stockpiled food during the COVID-19 pandemic and related lockdowns, Campbell Soup (CPB -1.39%) started September with a surprisingly spicy fiscal 2021 fourth-quarter earnings report. The quarter, which ended Aug. 1, saw revenue and earnings per share grow beyond analysts' consensus predictions. However, performance slowed from fiscal 2020 levels, a possible warning sign that Campbell won't be keeping up its robust gains much longer.

The company is on a rising trend overall but is still down from its high

Campbell Soup reported its fiscal fourth-quarter and full-year results on Sept. 1, and the numbers indicate the decline from pandemic-driven highs continues. Though Campbell beat analysts' estimates on both the top and bottom lines, they fell on a year-over-year basis. Fourth-quarter revenue was down 11%, and non-GAAP (or adjusted) earnings per share fell about 6% when backing out the extra week in the prior year.

Two children sit at a table eating soup

Image source: Getty Images.

For fiscal 2021, revenue fell 2%, while adjusted earnings edged upward 1%. Full-year earnings were a minor bright spot, but the company is losing momentum with last year's 28% profit surge during the pandemic seemingly a one-time event rather than a sustained turnaround.

However, the company did deliver modest quarterly growth compared to the same period in fiscal 2019, at least when excluding the discontinued operations of Campbell International. Continuing operations in the fourth quarter of 2019 (excluding international gains) generated $1.78 billion in revenue and $0.42 in earnings per share, while this year's results were were $1.87 billion and $0.55, respectively. 

Management said during the earnings call that the company's core product -- soup -- experienced a 14% drop in sales in the fourth quarter, while meals and beverages operating income fell 30%. Higher costs and supply chain problems cut into profitability with gross margin dropping from 35.4% to 31.3% year over year.

Campbell's guidance and plans

Campbell's guidance for fiscal 2022 calls for revenue to be approximately flat, while adjusted earnings per share should fall between 8% and 4%.

While the company enjoyed a cash windfall during the initial days of the pandemic, its plans going forward are uninspiring. The earnings release said Campbell has "strong plans to manage inflation," but these were revealed in the earnings call to consist of price increases, along with "supply chain productivity improvements and cost savings initiatives." Such moves seem unlikely to bolster the company's already declining sales.

Campbell is also planning some new product releases in fiscal 2022 as part of its "innovation plans." This includes new flavors with CEO Mark Clouse commenting, "[I]f you haven't tried the new chunky spicy chicken noodle, it's fantastic and brings variety to the critical at-home lunch occasion." It also intends to offer five new "power bowls," more plant-based products, and "a refresh of our Campbell's condensed soup." The new products may help, but none of the initiatives appear transformational, instead looking like modest incremental improvements or expansions of existing product lines.

The takeaway

Overall, Campbell Soup isn't the most exciting investment right now. The relatively stable results and 3.4% dividend yield mean its outlook is not quite bearish. However, the company lacks strong plans to strike out in new directions or to transform its operations into something more dynamic than a legacy canned and processed foods company. This doesn't inspire enough confidence for a bullish view, either. Shares are down 10% year to date and over 20% in the past five years.

While some food and beverage stocks have momentum likely to last beyond the pandemic, there is nothing in Campbell's latest earnings report to suggest it's one of the leading food stocks to consider investing in.