Campbell’s Soupy Returns Heat Up Puts

With earnings season winding down, the pickings are certainly getting slimmer. The notable tech, financial, and energy names have mostly done their time in the earnings confessional, leaving retail next week as a major sector in the spotlight. But this week is not yet over, so let�s take a look at Campbell Soup (NYSE: CPB), which reports on Friday morning.

CPB needs no introduction, though we should point out that the company is more than just soup. Other well-known brands include V8, Swanson, Prego, and Pepperidge Farms.� The problem is that food stocks are having a tough time balancing rising commodity prices with passing costs on to budget-conscious consumers. What�s more, the company is also dealing with heavier sales promotion costs.

The other problem facing CPB is that its recent post-earnings performance has been weak. Following the past four reports, the stock has dropped for two consecutive days, averaging a net loss of 2.5%. That may not sound like much, but the move has been consistent.

Currently the shares are in a rut, having gone nowhere for the past three months. For the past three weeks, the stock has been mired below its flat 50-day moving average.

Campbell Soup

The one thing that may hearten the bulls is that expectations for CPB are low. The whisper number is four cents below the consensus analyst earnings estimate, short interest is robust, and analyst ratings are aligned against the shares. But perhaps that�s to be expected for a stock that has severely underperformed the broader market for the past six months.� So we�re not seeing this pessimism as reason enough to like the stock.

As much as we love CPB�s products (especially during this brutal winter), we�re going to have to move to the bearish camp for this earnings play. With sketchy fundamentals and a history of performing poorly after recent earnings reports, we recommend buying the CPB March 35 Put for around $1.20.

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