Moody's on May 21 placed all the ratings of Campbell Soup Co. under review for downgrade, from stable, following an unexpectedly sharp decline in the company's profitability in its fiscal third quarter that ended April 29 and the CEO's sudden resignation.
The review primarily reflects the rating agency's expectation that Campbell's high financial leverage may continue for longer than anticipated and may rise further due to the recent deterioration in core operating performance.
The sharp decline in fiscal third-quarter profit raised doubts regarding the U.S. food producer's ability to meet its deleveraging plans following the Snyder's-Lance Inc. acquisition. CEO Denise Morrison's sudden departure added further uncertainty about Campbell's ability to overcome its operational challenges in the near term, said Brian Weddington, a senior credit officer at Moody's.
Moody's review will focus on developing a forward view of Campbell's operating performance and overall credit profile in light of deteriorating credit metrics.
Campbell trimmed its profit guidance for full fiscal 2018 and is now targeting adjusted EPS of $2.85 to $2.90, compared to the adjusted EPS of $3.04 in the previous fiscal year.
