Campbell Soup (CPB) is scheduled to report earnings on Friday, Sept. 11.
Analysts expect CPB to hold its own for the quarter, with no growth in profits from a year ago. That compares favorably with the past four quarters, in which the company averaged 25% growth in earnings. So, expectations are muted, to say the least.
The same lowered expectations are evident among our sentiment indicators, as well. Though it’s currently in the middle of its annual range, CPB’s put/call ratio is showing signs of rolling over.
That could be encouraging, as previous peaks in the ratio (in late April, early March, and late December) marked bottoms in the share price (circles in chart below).
Analysts are likewise skeptical of CPB’s future, as just a third (four of 12) rate the stock a “buy.” That leaves some room for upgrades, especially if CPB can impress with its report and outlook next week.
We like to look at companies that report after most of their competitors to get a feel for how the industry is doing, which is the case for CPB.
Competitors in the processed and packaged foods space — including General Mills (GIS), HJ Heinz Co. (HNZ) and Kraft (KFT) — generally exceeded earnings expectations. More importantly, the stocks gained significant ground after their respective reports. That bodes well for CPB.
We’ll end the analysis with the key factor for this potential trade — the technicals.
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CPB has pulled back along with the broader market this week. That decline has run the stock into its 20-day moving average, a trendline the stock has clung to today. The 20-day failed to stem a retreat in mid-August. So it was left to the 50-day to do the job. The 50-day sits about 2% below the current stock price, so there’s some room on the downside.
With CPB more than a week away from reporting, we have time to wait for potential support to kick in. A lot can happen in a day or two, let alone an entire week. So, we’re inclined to watch how CPB does around its 20-day and 50-day moving averages.
The sentiment is such that there’s plenty of pessimism to unwind into buying pressure should CPB impress with its report.
And the stock should enjoy some tailwind from its competitors, who have done well with their earnings reports.
Keep an eye on the charts for the next few days.
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