A Cheap Stock to Buy and Hold in a Volatile Market

Campbell’s isn’t just about soup anymore. In fact, its storied soup brand makes up just one fourth of total sales. Campbell’s has carved out a wide economic moat with its strong brands, entrenched retailer relationships, and cost advantage. However, we don’t think the market is giving Campbell’s enough credit for its cost-saving initiatives or for its strategic brand investments to keep pace with evolving consumer trends. This cheap wide-moat stock with an attractive yield has held up relatively well during the recent stock market selloff. Campbell’s lands on Morningstar analysts’ list of 33 Undervalued Stocks to Buy this quarter. It’s also among Morningstar chief US market strategist Dave Sekera’s 3 Stocks to Buy and Hold During Tariff Chaos.

Campbell’s has orchestrated significant changes in the past several years. Its portfolio mix has shifted dramatically, with its core soup lineup contributing less to total sales while snacks now make up around 50%. In addition, the company has worked to drive efficiencies across its supply chain and manufacturing network to fuel spending behind its brands and capabilities to solidify its competitive edge. The byproduct has been 3% average annual organic sales growth over the past five years against mid- to high-teens adjusted operating margins. We attribute this performance to Campbell’s sound strategic focus: leveraging technology, data insights, and artificial intelligence to bring products to market that align with evolving consumer trends while maintaining a close eye on costs.

Key Morningstar Metrics for Campbell’s

• Fair Value Estimate: $61
• Star Rating: 5 Stars
• Economic Moat Rating: Wide
• Uncertainty Rating: Medium

Economic Moat Rating

We believe Campbell’s has dug a wide moat through its strong brands, entrenched retailer relationships, and cost advantage. We forecast adjusted returns on invested capital including goodwill in the low teens to midteens over the next 10 years (exceeding our 7% weighted average cost of capital) and believe the company will generate excess economic profits over the next two decades. Campbell’s controls 60% of the US shelf-stable soup category. It also ranks in the top three in several adjacent categories, such as sauces, broth, shelf-stable ready meals, and shelf-stable juice, rendering the company a valued partner for retailers. With its broad domestic manufacturing and distribution network, Campbell’s operates with lower unit and distribution costs and greater supply chain efficiency than smaller peers. This affords dependable access to inputs that others may be unable to attain.

Read more about Campbell’s moat rating.

Fair Value Estimate for Campbell’s Stock

Our $61 fair value estimate reflect a more downbeat near-term sales and profit outlook, including adjusted earnings per share of $2.97 for fiscal 2025. Over the next decade, we expect low-single-digit annual sales growth and high-single-digit adjusted average EPS growth. Our valuation implies a fiscal 2026 enterprise value/EBITDA of 12 times. Campbell’s aims to extract another $250 million in costs through fiscal 2028, on top of $950 million in the past few years, which we think is prudent. We forecast that over the next 10 years, the company will spend around 4% of sales on marketing and approximately 1% of sales on research and development, roughly in line with historical levels. This results in operating margin that tops 18% by the end of our 10-year explicit forecast.

Read more about Campbell’s fair value estimate.

Risk and Uncertainty

As the leading global producer of soup, a highly profitable segment in packaged food, Campbell’s faces intense competitive pressure from national peers, private-label fare, and niche natural and organic offerings. The rapidly evolving nature of consumer trends has proved challenging for Campbell, and startups have exhibited more agility in adapting their product mix. We think the company could resume the pursuit of select acquisitions or partnerships to better understand changing consumer tastes and preferences, but it risks paying an excessive premium or stumbling in integration. Also, volatile input costs can weigh on profits. To the extent that Campbell’s raises prices to offset these pressures, volume could be constrained.

Read more about Campbell’s risk and uncertainty.

Campbell’s Bulls Say

• Removing excess costs should allow Campbell’s to reinvest in its brands, about a dozen of which generate more than $100 million in sales each year.
• Leveraging technology, data insights, and AI should aid Campbell’s efforts to bring out consumer-valued new products while also attracting new consumers to its vast product mix.
• About half of Campbell’s sales result from the faster-growing on-trend snack aisle, which stands to offset more muted prospects for the mature soup category over the longer term.

Campbell’s Bears Say

• Another step up in labor, logistics, packaging, and raw material costs could stifle Campbell’s ability to drive meaningful margin gains.
• In our view, the added costs associated with improving the health profile of the company’s products may result in margin erosion.
• Volume could be stymied if Campbell’s raises prices amid increased promotions from lower-priced private-label fare and other national brands.

This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of April 9, 2025.