When you’re sick, there’s almost nothing more comforting than curling up on a couch with a bowl of soup. And clearly, investors have taken some comfort in holding Campbell Soup Company (NYSE:CPB) during the recent market selloff.
CPB stock is up 36% over the last year, and is by far outperforming the market year-to-date, notching just a 1% loss while the S&P 500 is down 21%.
So what’s behind the move higher? Well, as it turns out, as state health departments are recommending that people stock up on non-perishable food and over-the-counter medications, people are also stocking up on Campbell Soup products.
“We’re working very closely with folks to make sure that we keep them in stock,” Campbell CEO Mark Clouse told Reuters.
Fortunately for CPB stock, the company’s supply lines should be relatively unaffected by the coronavirus from China that has killed more than 4,000 and infected more than 115,000 globally.
About 90% of Campbell Soup’s ingredients come from North America. Clouse said that less than 2% of ingredients com from China, where the outbreak began. That’s good news for investors.
Campbell Soup at a Glance
Campbell Soup is coming off a great earnings report this month, with earnings increasing 10% to 65 cents per share and a net income of $1.2 million, which is better than the company’s net loss of $59 million in the same quarter a year ago.
Looking ahead, CPB raised guidance to $2.55 to $2.60 per share for the whole year, which is better than Wall Street’s estimate of $2.53.
The company is absolutely destroying the competition these days, outperforming Kellogg’s (NYSE:K), which is up 9% in 12 months, General Mills (NYSE:GIS), up 13%, and Blue Apron (NYSE:APRN), which is down 83%.
With a forward price-earnings ratio of 20.9 and a dividend of 2.8%, Campbell Soup has a solid A rating in my Portfolio Grader.
What Should Investors Expect?
These days, Campbell Soup is a lot more than soup. The New Jersey-based company makes a variety of soups, beverages and snacks, such as Pop Secret popcorn, Swanson cooking broths, Prego sauces, Goldfish crackers and Cape Cod snacks.
Perhaps somewhat ironically, what was recently a weakness for Campbell Soup is now a strength. In the last few years, consumers are more interested in fresh food alternatives rather than picking up a can of soup because there’s a perception that canned food isn’t as high in quality.
The company made a strong push into non-processed foods in recent years by buying organic food maker Plum Organics.
Not all of those purchases made during the reign of Clouse’s predecessor, Denise Morrison, worked out in the company’s favor. CPB stock fell into the low $30-range in 2018 and 2019. A takeover fight with activist investor Dan Loeb triggered Morrison’s departure and Loeb assisted in selecting Clouse.
“Don’t get me wrong. I’m not suggesting that this is an easy solve,” Clouse told a reporter. “That’s why I don’t think it’s an overnight fix.”
The Bottom Line on CPB Stock
While Wall Street suffers through the coronavirus selloff, investors will be flocking to safety. An ideal place to go is a well-established, consumer staples stock that pays a nice dividend. It also helps that Campbell Soup’s products are in high demand.
There’s no doubt about it: Campbell Soup is a great prescription here.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.