Introduction and financial results
Consumer staples stocks are supposed to be stable anchors even in a volatile market. However, Campbell Soup (NYSE:CPB) dropped like a falling soup can on 18 May 2018 as the company announced quarterly results, with an impairment charge and reduced EPS guidance for the year. It also announced that its CEO was retiring immediately, no doubt pushed out by the Board after a weak stretch of a few years.
The company guided to $2.85-2.90 in adjusted EPS on flat organic revenue growth in the current fiscal year ending July 2018, after generating $3.04 in adjusted EPS in the past fiscal year. However, the company is not shy about dumping costs into restructuring charges and integration costs, so the true earnings are in the $2 to $2.40 per share range. One can rightly ignore the $619 million impairment charge the company took to write down the value of past acquisitions as this is water under the bridge. Of course, if the company were to continue making value-destroying acquisitions, that would be a negative that one would need to factor in. However, the company seems to have reached a point where the Board and investors are unlikely to permit any more cash being sent out the door to shareholders of other companies.
