In November 2024, Campbell's (CPB +0.04%) changed its official name from Campbell Soup Company to The Campbell's Company. The move was an effort to blend its 155-year history with an expanded portfolio that goes far beyond its flagship soup line, with brands like Goldfish, Pepperidge Farm, Cape Cod, Kettle, Rao's pasta sauce, Prego, and more.
Despite being a broader business, Campbell's market capitalization is now less than $7 billion -- making it one of the three smallest S&P 500 (^GSPC +0.44%) components and putting the company at risk of being kicked out of the iconic index.
Here's why the high-yield dividend stock is under pressure but could still be worth buying for value investors.
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A snack slowdown
Campbell's fell 7.1% on March 11 in response to weak second-quarter fiscal 2026 results and reduced full-year guidance.
The snacks segment is largely to blame for the guidance cut, as sales declined 6% compared to a 4% drop for meals and beverages. But snacks produced just $67 million in quarterly operating earnings on $914 million in revenue (a 7.3% operating margin) compared to $252 million in meals and beverages operating earnings on $1.65 billion in revenue (a 15.3% operating margin).
The company is paying the price for its woeful 2018 acquisition of Snyder's-Lance, as snacks are currently the worst-performing part of the business. But management expressed confidence in brands such as Cape Cod and Kettle, which are differentiated enough from the competition to win over the long term.
The company's meal portfolio remains fairly strong, with Rao's surpassing $1 billion in trailing 12-month sales compared to around $6 billion in total trailing 12-month meals and beverage sales.
By far the best aspect of Campbell's business is its brands used in cooking, rather than snacks and meal replacements.
On the earnings call, management noted that a little over half of its condensed soup portfolio is growing, especially cooking soups like cream of mushroom and cream of chicken, which are often used as ingredients rather than stand-alone meals. Similarly, Rao's is an integral part of home-cooked pasta meals rather than a replacement on its own.
NASDAQ: CPB
Key Data Points
Down but not out
Campbell's is falling because the company has failed to execute on what appears to be a pretty solid brand portfolio. Despite weakness in certain categories, there are aspects of the business to be hopeful about.
In the meantime, Campbell's fiscal 2026 earnings per share guidance of $2.15 to $2.25 is still higher than its projected annual dividend payment of $1.56. The sell-off has pushed Campbell's valuation to multi-decade lows and its yield to multi-decade highs, showcasing just how gloomy sentiment is right now.
CPB Dividend Yield data by YCharts.
Now more than ever, Campbell's needs to lean into its meal brands to cater to value and health-conscious consumers. Focusing on its high-margin segments will reduce the need to spend on marketing and promotions, and "better-for-you" snack brands like Cape Cod and Kettle offer an alternative to saltier options.
All told, Campbell's stands out as a compelling value stock for patient passive income investors who believe that the company's challenges are setbacks rather than a doomsday scenario.
