) may have a great history of beating the number, but lately
estiamtes have turned south. CPB is a Zacks Rank #5 (Strong Sell)
and it is the Bear of the Day.
Big Time Winning Streak
Just beating the number all the time will not keep a stock from
being a Zacks Rank #5 (Strong Sell). The rank is more about the
estimate revisions that look forward as opposed to the earnings
beats which are historical in nature.
That said, the Bear of the Day does have a two year win streak on
its hands. Actually it is a quarter longer than that, as CPB has
beat the Zacks Consensus Estimate in each of the last 9 quarters.
Campbell Soup produces branded convenience food products. The
company operates in three business segments: Soup and Sauces,
Biscuits and Confectionery, and Away From Home. Campbell Soup was
founded in 1869 and is headquartered in Camden, New Jersey.
As mentioned earlier, the soup maker has had a great run of
earnings beats. Despite all these beats, the stock has not reacted
all that positively. In five of the last six earnings, the stock
has traded lower in the session following the announcement. That
does not leave a good taste in investors' mouths.
The most recent report saw a big negative surprise on the topline.
The company reported revenue that was $107 million less than
expected for a 5.85% negative revenue surprise. The marked only the
second time in the last seven reports that the top line came in
Earnings Estimates Slip
Estimates for CPB have slipped of late, the main reason the Zacks
Rank has fallen. The Zacks Consensus Estimate for 2013 stood at
$2.76 in July, but fell to $2.67 in August and then down to $2.59
Similarly the 2014 estimate has moved from $2.90 to $2.77 to $2.74
over the same time horizon.
The downward trend in estimate revisions is one of the biggest
factors that can cause a stock to become a Zacks Rank #5 (Strong
The valuation picture for CPB is pretty much where you might expect
it to be. A 15x trailing and forward earnings multiple show a slim
discount to the industry average, While price to book of 10x is
almost three times as high as the industry average. Its price to
sales multiple of 1.6x is below that of the 2.2x for the industry
average. I like to look at revenue growth, and fiscal 2015 is
expected to see 2.3% growth vs a 4.3% growth rate for the rest of
the industry. That tells me the market is growing, but CPB may not
be adding share as fast as its competitors.
The price and consensus chart really tells the story of what is
going on at CPB. The estimates started moving lower a few months
ago, and when they did the stock fell from its recent highs.
Established companies in more defensive industries tend to trade in
line with the earnings estimates, making the rank a great short
term indicator for stocks like CPB.
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor
in charge of the
Run Investor service
, a Buy and Hold service where he recommends the stocks in the
Brian is also the editor of
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a trading service that focuses on small cap stocks and also carries
a risk limiting strategy. Subscribers get daily emails along with
buy, and sell alerts.
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