Morningstar

Time to Stock Up on Campbell Soup

Time to Stock Up on Campbell Soup
Securities In This Article
Campbell Soup Co
(CPB)

Erin Lash: Over the past 18 months, Campbell Soup shares have faltered, falling nearly 30% versus a 25% appreciation in the S&P 500 Index, leaving shares attractively valued relative to other packaged food operators.

In our view, the firm's inflated valuation a year and a half ago reflected sentiment that its profit improvement trajectory would continue unabated. However, in our view, we've long thought the combination of input cost inflation, the need to up the ante on brand reinvestments to support the intangible asset source of its wide moat, as well as the lower profit profile of its expanding natural and organic business all stood to eat into its profit gains.

While Campbell is not immune to the number of headwinds plaguing firms throughout the consumer products realm, we don't view these headwinds as insurmountable nor do we think improvement is anchored within its core soup franchise. When combined with its prudent capital allocation and 3% dividend yield, we think long-term investors would be wise to stock up on this wide moat name.

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About the Author

Erin Lash, CFA

Sector Director
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Erin Lash, CFA, is a sector director, AM Consumer, for Morningstar*. In addition to leading the sector team, she covers packaged food and household and personal care companies. Beyond managing a team of nine analysts and associates covering an array of consumer firms, Lash also conducts fundamental analysis of 13 multi-billion-dollar market capitalization firms in the packaged food and household and personal care space.

Before joining Morningstar in 2006, Lash spent four years as an investment analyst covering retail, transportation, and technology firms for State Farm Insurance. In this capacity, Lash analyzed financial statements, business strategy, and fundamentals of owned companies and potential investments, presenting her recommendations based on this analysis to State Farm portfolio managers for ownership consideration.

Lash holds a bachelor’s degree in finance from Bradley University’s Foster College of Business. She also holds a master’s degree in business administration, with concentrations in accounting and finance, from the University of Chicago Booth School of Business. Lash has completed the Chartered Financial Analyst® designation. She ranked second in the food and tobacco industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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